REG - Smiths Group PLC - Final Results <Origin Href="QuoteRef">SMIN.L</Origin> - Part 3
23/09/2015 07:01
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costs unless the asset is being fair valued through the income statement.
The subsequent measurement of financial assets depends on their classification. Loans and receivables are measured at
amortised cost using the effective interest rate method. Available for sale financial assets are subsequently measured at
fair value, with unrealised gains and losses being recognised in other comprehensive income. Financial assets where changes
in fair value are charged (or credited) to the income statement are subsequently measured at fair value. Realised and
unrealised gains and losses arising from changes in the fair value of the 'financial assets at fair value through the
income statement' category are included in the income statement in the period in which they arise.
Financial assets are derecognised when the right to receive cash-flows from the assets has expired, or has been
transferred, and the Company has transferred substantially all of the risks and rewards of ownership. When securities
classified as available for sale are sold or impaired, the accumulated fair value adjustments previously taken to reserves
are included in the income statement.
Financial assets are classified as current if they are expected to be realised within 12 months of the balance sheet date.
Financial liabilities
Borrowings are initially recognised at the fair value of the proceeds, net of related transaction costs. These transaction
costs, and any discount or premium on issue, are subsequently amortised under the effective interest rate method through
the income statement as interest over the life of the loan, and added to the liability disclosed in the balance sheet.
Related accrued interest is included in the borrowings figure.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least one year after the balance sheet date.
Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognising any resulting gain or loss depends on whether the derivative is
designated as a hedging instrument and, if so, the nature of the item being hedged.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately
in the income statement.
Fair value hedge
Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair values of the hedged assets or liabilities that are attributable to the
hedged risk.
Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash-flow hedges. Any gain or loss on the
hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income; the gain or
loss relating to any ineffective portion is recognised immediately in the income statement.
When a foreign operation is disposed of, gains and losses accumulated in equity related to that operation are included in
the income statement.
Cash-flow hedge
The effective portions of changes in the fair values of derivatives that are designated and qualify as cash-flow hedges are
recognised in equity. The gain or loss relating to any ineffective portion is recognised immediately in the income
statement.
Amounts accumulated in the hedge reserve are recycled in the income statement in the periods when the hedged items will
affect profit or loss (for instance when the forecast sale that is hedged takes place). If a forecast transaction that is
hedged results in the recognition of a non-financial asset (for example, inventory) or a liability, the gains and losses
previously deferred in the hedge reserve are transferred from the reserve and included in the initial measurement of the
cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in the hedge reserve at that time remains in the reserve and is recognised when the
forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to the income
statement.
Fair value of financial assets and liabilities
The fair values of financial assets and financial liabilities are the amounts at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or liquidation sale.
'IFRS 13: Fair value measurement' requires fair value measurements to be classified according to the following hierarchy:
· level 1 - quoted prices in active markets for identical assets or liabilities;
· level 2 - valuations in which all inputs are observable either directly (ie as prices) or indirectly (ie derived from
prices); and
· level 3 - valuations in which one or more inputs are not based on observable market data.
See note 21 for information on the methods the Group uses to estimate the fair values of its financial instruments.
Dividends
Dividends are recognised as a liability in the period in which they are authorised. The interim dividend is recognised when
it is paid and the final dividend is recognised when it has been approved by shareholders at the Annual General Meeting.
Recent accounting developments
The following standards and interpretations have been issued by the IASB and will affect future annual reports and
accounts.
· 'IFRS 9: Financial instruments'
· 'IFRS 15: Revenue from contracts with customers'
A review of the impact of these standards and interpretations is being undertaken, and the impact of adopting them will be
determined once this review has been completed. In particular the review of the impact of 'IFRS 15: Revenue from contracts
with customers' will require an assessment at contract level for the military and long-term service businesses, and the
impact of adopting this standard cannot be reliably estimated until this work is substantially complete.
These standard are under review by the EU. Smiths will confirm their adoption date after the standards have been approved
by the EU.
Parent Company
The accounts of the Parent Company, Smiths Group plc, have been prepared in accordance with UK GAAP. The Company accounts
are presented in separate financial statements.
The principal subsidiaries of the Parent Company are listed in the above accounts.
The ultimate parent company of the Group is Smiths Group plc, a company incorporated in England and Wales and listed on the
London Stock Exchange.
Notes to the accounts
1 Segment information
Analysis by operating segment
The Group is organised into five divisions: John Crane, Smiths Medical, Smiths Detection, Smiths Interconnect and Flex-Tek.
These divisions design and manufacture the following products:
· John Crane - mechanical seals, seal support systems, engineered bearings, power transmission couplings and specialist
filtration systems;
· Smiths Medical - infusion systems, vascular access (including safety needles), patient airway and temperature management
equipment and specialty devices in areas of in vitro fertilisation, diagnostics and emergency patient transport;
· Smiths Detection - sensors that detect and identify explosives, narcotics, weapons, chemical agents, biohazards and
contraband;
· Smiths Interconnect - specialised electronic and radio frequency components and sub-systems that connect, protect and
control critical systems;
· Flex-Tek - engineered components that heat and move fluids and gases, flexible hosing and rigid tubing.
The position and performance of each division is reported at each Board meeting to the Board of directors. This information
is prepared using the same accounting policies as the consolidated financial information except that the Group uses
headline operating profit to monitor divisional results and operating assets to monitor divisional position. See note 3 for
an explanation of which items are excluded from headline measures.
Intersegment sales and transfers are charged at arm's length prices.
Year ended 31 July 2015
John Crane Smiths Smiths Smiths Interconnect Flex-Tek Corporate Total
£m Medical Detection £m £m costs £m
£m £m £m
Revenue 905 836 467 420 269 2,897
Divisional headline operating profit 225 166 55 49 50 545
Corporate headline operating costs (34) (34)
Headline operating profit/(loss) 225 166 55 49 50 (34) 511
Exceptional operating items (note 4) (25) (16) (10) (3) (9) 14 (49)
Legacy retirement benefits (1) (7) (8)
Amortisation and impairment of acquired intangible assets (34) (8) (18) (60)
Operating profit/(loss) 165 142 45 28 41 (27) 394
Exceptional finance costs - adjustment to discounted provision (note 4) (4) (1) (5)
Net finance costs - other (64)
Profit before taxation 325
Year ended 31 July 2014
John Crane Smiths Smiths Smiths Interconnect Flex-Tek Corporate Total
£m Medical Detection £m £m costs £m
£m £m £m
Revenue 941 804 512 445 250 2,952
Divisional headline operating profit 234 159 25 71 47 536
Corporate headline operating costs (32) (32)
Headline operating profit/(loss) 234 159 25 71 47 (32) 504
Exceptional operating items (note 4) (56) (8) (1) (5) (10) (1) (81)
Legacy retirement benefits (restated) (6) (6)
Amortisation and impairment of acquired intangible assets (12) (9) (1) (17) (39)
Operating profit/(loss) 166 142 23 49 37 (39) 378
Exceptional finance costs - adjustment to discounted provision (note 4) (5) (1) (6)
Net finance costs - other (restated) (70)
Profit before taxation 302
The operating assets and liabilities of the five divisions are set out below:
31 July 2015
John Crane Smiths Smiths Smiths Interconnect Flex-Tek Total
£m Medical Detection £m £m £m
£m £m
Property, plant, equipment, development projects and other intangibles 96 175 84 38 22 415
Working capital assets 351 247 260 160 83 1,101
Operating assets 447 422 344 198 105 1,516
Derivatives, tax and retirement benefit assets 442
Goodwill and acquired intangibles 1,351
Corporate assets 176
Cash 495
Total assets 3,980
Working capital liabilities (141) (108) (156) (64) (37) (506)
Corporate and non-headline liabilities (316)
Derivatives, tax and retirement benefit liabilities (417)
Borrowings (1,313)
Total liabilities (2,552)
Average divisional capital employed 872 1,126 577 535 148 3,258
Average corporate capital employed (61)
Average total capital employed 3,197
Capital employed is a non-statutory measure of invested resources. It comprises statutory net assets adjusted to add
goodwill recognised directly in reserves in respect of subsidiaries acquired before 1 August 1998 of £815m (2014: £815m)
and eliminate post-retirement benefit related assets and liabilities and litigation provisions relating to exceptional
items, both net of related tax, and net debt.
31 July 2014
John Crane Smiths Smiths Smiths Interconnect Flex-Tek Total
£m Medical Detection £m £m £m
£m £m
Property, plant, equipment, development projects and other intangibles 91 159 97 39 19 405
Working capital assets 350 228 275 161 73 1,087
Operating assets 441 387 372 200 92 1,492
Derivatives, tax and retirement benefit assets 359
Goodwill and acquired intangibles 1,382
Corporate assets 142
Cash 190
Total assets 3,565
Working capital liabilities (143) (97) (166) (70) (26) (502)
Corporate and non-headline liabilities (317)
Derivatives, tax and retirement benefit liabilities (507)
Borrowings (994)
Total liabilities (2,320)
Average divisional capital employed 876 1,100 632 518 139 3,265
Average corporate capital employed (47)
Average total capital employed 3,218
Non-headline liabilities comprise provisions and accruals relating to exceptional items, acquisitions and disposals.
Divisional headline operating profit is stated after charging/(crediting) the following items:
Year ended 31 July 2015
John Crane Smiths Smiths Smiths Flex-Tek Reconciling items Total
£m Medical Detection Interconnect £m £m £m
£m £m £m
Depreciation 14 18 4 9 3 1 49
Amortisation of capitalised development 13 10 23
Amortisation of software, patents and intellectual property 3 3 2 1 6 15
Amortisation of acquired intangibles 33 33
Impairment of goodwill 27 27
Share-based payment 2 1 1 1 4 9
Divisional headline operating profit is stated after charging/(crediting) the following items:
Year ended 31 July 2014
John Crane Smiths Smiths Smiths Interconnect Flex-Tek Reconciling Total
£m Medical Detection £m £m items £m
£m £m £m
Depreciation 14 16 5 7 3 1 46
Amortisation of capitalised development 12 9 21
Amortisation of software, patents and intellectual property 2 2 4 1 4 13
Amortisation of acquired intangibles 39 39
Share-based payment 2 1 1 1 1 4 10
The reconciling items are central costs, amortisation and impairment of acquired intangible assets and charges which
qualify as exceptional.
The capital expenditure for each division is:
John Crane Smiths Smiths Smiths Interconnect Flex-Tek Reconciling Total
£m Medical Detection £m £m items £m
£m £m £m
Capital expenditure year ended 31 July 2015 19 44 11 12 5 6 97
Capital expenditure year ended 31 July 2014 18 44 14 11 3 5 95
The reconciling items comprise corporate capital expenditure through Smiths Business Information Services on IT equipment
and software.
Analysis of revenue
The revenue for the main product and service lines for each division is:
First-fit Aftermarket Total
John Crane £m Oil, gas and Chemical and Distributors General £m
petrochemical pharmaceutical £m industry
£m £m £m
Revenue year ended 31 July 2015 396 277 79 71 82 905
Revenue year ended 31 July 2014 (restated) 443 267 81 68 82 941
John Crane has reviewed the classification of their upstream energy services business. Revenue of £62m (2014: £83m) has
been reclassified from Aftermarket: oil, gas and petrochemical to First-fit to reflect the cyclical characteristics of the
business. As a result of this change, Original equipment manufacture has been renamed First-fit as this better describes
the activities of the combined constituents.
Smiths Medical Infusion Vascular Vital care Specialty Total
systems access £m products £m
£m £m £m
Revenue year ended 31 July 2015 262 279 225 70 836
Revenue year ended 31 July 2014 (restated) 235 277 221 71 804
Smiths Medical has realigned their product portfolio to reflect how they monitor business performance. Revenue for the year
under the previous reporting categories is: Medication delivery £269m (2014: £241m); Vital care £328m (2014: £328m); and
Safety devices £239m (2014: £235m).
Smiths Detection Transportation Ports and Military Critical Non-security Total
£m borders £m infrastructure £m £m
£m £m
Revenue year ended 31 July 2015 243 50 69 105 467
Revenue year ended 31 July 2014 (restated) 263 78 74 96 1 512
Sales previously separately reported as emergency responders have been included in military sales, reflecting the similar
product technology.
Smiths Interconnect Connectors Microwave Power Total
£m £m £m £m
Revenue year ended 31 July 2015 149 168 103 420
Revenue year ended 31 July 2014 153 198 94 445
Flex-Tek Fluid Flexible Heat Construction Total
Management Solutions Solutions Products £m
£m £m £m £m
Revenue year ended 31 July 2015 69 51 65 84 269
Revenue year ended 31 July 2014 (restated) 66 51 57 76 250
Flex-Tek has moved high-pressure hose manufacturing from Fluid Management to Flexible Solutions. Revenue of £17m (2014:
£17m) has been reclassified as a result of this reorganisation.
The Group's statutory revenue is analysed as follows:
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Sale of goods 2,600 2,683
Services 268 239
Contracts 29 30
2,897 2,952
Analysis by geographical areas
The Group's revenue by destination and non-current operating assets by location are shown below:
Revenue Intangible assets and
property plant and
equipment
Year ended Year ended 31 July 2015 31 July 2014
31 July 2015 31 July 2014 £m £m
£m £m
United Kingdom 121 119 119 132
Germany 128 148 270 304
France 81 88 16 19
Other European 290 340 58 67
United States of America 1,378 1,319 1,172 1,132
Canada 111 121 14 14
Mexico 40 32 9 9
Japan 93 106 14 16
China 98 113 57 53
Rest of the World 557 566 48 56
2,897 2,952 1,777 1,802
2 Operating profit is stated after charging
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Research and development expense 84 85
Operating leases
- land and buildings 31 29
- other 9 10
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Audit services
Fees payable to the Company's auditors for the audit of the Company's annual financial statements 3 2
Fees payable to the Company's auditors and its associates for other services
- the audit of the Company's subsidiaries 2 3
5 5
All other services 1 1
Other services comprise tax advisory services £0.1m (2014: £0.2m), tax compliance services £0.1m (2014: £0.1m) and one-off
IT and consulting projects £0.4m (2014: £0.5m).
Total fees for non-audit services comprise 12% (2014: 17%) of audit fees.
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 material litigation in respect of products no longer in
production;
· amortisation and impairment of intangible assets acquired in a business combination - the charge is a non-cash item, and
the directors believe that it should be added back to give a clearer picture of underlying performance;
· other financing gains and losses, which represent the potentially volatile gains and losses on derivatives and other
financial instruments which are not hedge accounted under IAS 39; and
· scheme administration costs, financing credits and charges relating to retirement benefits.
The excluded items are referred to as 'non-headline' items.
Notes Year ended Year ended
31 July 2015 31 July 2014
£m £m
Operating profit 394 378
Exclude
- exceptional operating items 4 49 81
- legacy retirement benefits 9 8 6
- impairment of goodwill 12 27
- amortisation of acquired intangible assets 11 33 39
Non-headline items in operating profit 117 126
Headline operating profit 511 504
Finance costs (69) (76)
Exclude
- exceptional finance costs 4 5 6
- other financing gains and losses 4 2
- other financing costs retirement benefits 5,9 8 9
Non-headline items in finance costs 17 17
Headline finance costs (52) (59)
Profit before taxation 325 302
Non-headline items in operating profit 117 126
Non-headline items in finance costs 17 17
Headline profit before taxation 459 445
Profit after taxation - continuing operations 248 235
Exclude
- non-headline items in profit before taxation 134 143
- tax on excluded items 7 (40) (53)
94 90
Headline profit after taxation - continuing operations 342 325
Headline earnings before interest, tax, depreciation and amortisation
Headline EBITDA, calculated as follows, is used to calculate one of Smiths cash-flow targets, see note 26 for details.
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Headline operating profit 511 504
Exclude:
Depreciation 49 46
Amortisation of development costs 23 21
Amortisation of software, patents and intellectual property 15 13
Headline EBITDA 598 584
4 Exceptional items
An analysis of the amounts presented as exceptional items in these financial statements is given below:
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Operating items
Restructuring programmes (38) (29)
Gains on changes to post-retirement benefits (note 9) 14
Profit on disposals and acquisitions and disposal costs 2 4
Resolution of items originally posted as non-headline 2
Litigation
- provision for Titeflex Corporation claims (note 23) (8) (10)
- provision for John Crane, Inc. asbestos litigation (note 23) (19) (48)
(49) (81)
Financing items
Exceptional finance costs - adjustment to discounted provisions
- provision for Titeflex Corporation claims (note 23) (1) (1)
- provision for John Crane, Inc. asbestos litigation (note 23) (4) (5)
(54) (87)
Year ended 31 July 2015
Restructuring costs include £39m in respect of Fuel for Growth and a £1m credit for provisions relating to earlier
restructuring programmes which were released in the period. The Fuel for Growth programme, which involves redundancy,
relocation and consolidation of manufacturing, is considered exceptional by virtue of its size and impact on the Group's
operations.
Gains of £14m on changes to post-retirement benefits arise from a settlement offer by the US defined benefit pension plans
- allowing deferred members a one-off option to elect to cash out their retirement entitlements rather than receive a
pension at retirement - which was completed in September 2014 (see note 9).
A charge of £8m has been made by Titeflex Corporation in respect of changes to the estimated cost of future claims
including those from insurance companies seeking recompense for damage allegedly caused by lightning strike. The change
comprises £7m in respect of movements in the gross provision and £1m relating to changes in discounting.
The operating charge in respect of John Crane, Inc. litigation comprises £14m in respect of increased provision for adverse
judgments and legal defence costs, £4m in respect of litigation management and legal fees in connection with litigation
against insurers, and £1m arising from the decrease in US risk-free rates.
The final resolution of items previously reported as exceptional has been reported as exceptional because the earlier
transactions were treated as exceptional items. The litigation provisions for Titeflex Corporation and John Crane, Inc.,
and the commutation of insurance policies received by John Crane, Inc., were reported as exceptional in the year of
recognition. Consequently, the ongoing adjustments to these provisions are reported as exceptional items.
Year ended 31 July 2014
Restructuring costs included a final charge of £3m in respect of the Smiths Detection improvement programme and £26m in
respect of Fuel for Growth. These programmes, which involve redundancy, relocation and consolidation of manufacturing, are
considered exceptional by virtue of their size.
Profit on disposals includes the expiry of certain warranties on the disposal of Cross Match Technologies, Inc., which has
generated an additional profit of £3m.
A charge of £10m was recognised by Titeflex Corporation. This reflected costs (which are not expected to recur) associated
with one anomalous case which was settled during the year together with the estimated cost of future claims including those
from insurance companies seeking recompense for damage allegedly caused by lightning strike, net of small gains relating to
changes in discounting.
The operating charge in respect of John Crane, Inc. litigation comprised £49m in respect of increased provision for adverse
judgments and legal defence costs, £1m in respect of legal fees in connection with litigation against insurers, less £2m
arising from changes in US risk-free rates. The increase in the provision reflected two large historical judgments which
were settled in the year.
5 Net finance costs
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Interest receivable 3 3
Interest payable
- bank loans and overdrafts, including associated fees (8) (7)
- other loans (47) (55)
Interest payable (55) (62)
Other financing gains/(losses)
- fair value gains/(losses) on hedged debt 8 (3)
- fair value (losses)/gains on fair value hedge (8) 3
- net foreign exchange (losses)/gains (4) (2)
- exceptional finance costs - adjustment to discounted provisions (5) (6)
Other financing losses (9) (8)
Net interest expense on retirement benefit obligations (8) (9)
Net finance costs (69) (76)
6 Earnings per share
Basic earnings per share are calculated by dividing the profit for the year attributable to equity shareholders of the
Parent Company by the average number of ordinary shares in issue during the year.
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Profit attributable to equity shareholders for the year
- total 246 233
Average number of shares in issue during the year 394,742,972 394,296,986
Diluted earnings per share are calculated by dividing the profit attributable to ordinary shareholders by 398,552,818
(2014: 398,399,449) ordinary shares, being the average number of ordinary shares in issue during the year adjusted by the
dilutive effect of employee share schemes. For the year ended 31 July 2015 no options (2014: no options) were excluded from
this calculation because their effect was anti-dilutive for continuing operations.
A reconciliation of basic and headline earnings per share is as follows:
Year ended 31 July 2015 Year ended 31 July 2014
£m EPS £m EPS
(p) (p)
Profit attributable to equity shareholders of the Parent Company 246 62.4 233 59.0
Exclude
Non-headline items and related tax (note 3) 94 23.7 90 22.8
Headline 340 86.1 323 81.8
Statutory earnings per share - diluted (p) 61.8 58.4
Headline earnings per share - diluted (p) 85.3 81.0
7 Taxation
The Group's approach to taxation is set out in the Financial review. This note only provides information about corporate
income taxes under IFRS. Smiths companies operate in over 50 countries across the world. They pay and collect many
different taxes in addition to corporate income taxes including: payroll taxes; value added and sales taxes; property
taxes; product-specific taxes and environmental taxes. The costs associated with these other taxes are included in profit
before tax.
Year ended Year ended
31 July 2015 31 July 2014
£m £m
The taxation charge in the consolidated income statement for the year comprises
- current income tax charge 71 93
- current tax adjustments in respect of prior periods (1) (4)
Current taxation 70 89
- deferred taxation 7 (22)
Total taxation expense in the consolidated income statement 77 67
Reconciliation of the tax charge
The tax expense on the profit for the year for continuing operations is different from the standard rate of corporation tax
in the UK of 20.7% (2014: 22.3%). The difference is reconciled as follows:
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Profit before taxation - continuing operations 325 302
Notional taxation expense at UK rate of 20.7% (2014: 22.3%) 67 67
Different tax rates on non-UK profits and losses 6 7
Non-deductible expenses, tax credits and non-taxable income (6) (6)
Adjustments to unrecognised deferred tax 11 5
Prior year true-up (1) (6)
77 67
Comprising
- taxation on headline profit 117 120
- tax on non-headline loss (40) (53)
Taxation expense in the consolidated income statement 77 67
The head office of Smiths Group is domiciled in the UK, so the tax charge has been reconciled to UK tax rates. In recent
years, Smiths has made substantial payments to its UK defined benefit pension plans which generated significant UK tax
losses.
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Tax on items charged/(credited) to equity
Deferred tax charge/(credit)
- retirement benefit schemes (21) (6)
- share options 1 1
(20) (5)
The net retirement benefit credit to equity includes £nil (2014: £1m) relating to UK schemes. The UK schemes are closed and
this amount represents tax relief that was set off against amounts previously charged to equity.
Deferred taxation
Excess tax Share-based Retirement Capitalised Other Total
depreciation payment benefit development £m £m
on fixed assets £m obligations expenditure
and goodwill £m £m
£m
At 31 July 2013 (84) 7 52 (38) 175 112
Credit/(charge) to income statement 4 (1) (9) 28 22
Credit/(charge) to equity (1) 6 5
Exchange adjustments 8 (5) 4 (19) (12)
At 31 July 2014 (72) 5 44 (34) 184 127
Deferred tax assets (19) 5 44 (9) 164 185
Deferred tax liabilities (53) (25) 20 (58)
At 31 July 2014 (72) 5 44 (34) 184 127
Credit/(charge) to income statement (3) 1 (11) 1 5 (7)
Credit/(charge) to equity (1) 21 20
Exchange adjustments (6) 2 (2) 13 7
At 31 July 2015 (81) 5 56 (35) 202 147
Deferred tax assets (15) 5 56 (8) 180 218
Deferred tax liabilities (66) (27) 22 (71)
At 31 July 2015 (81) 5 56 (35) 202 147
Included in other deferred tax balances above are:
· a deferred tax asset of £28m (2014: £21m) relating to losses carried forward. The Group has recognised deferred tax on
the basis that operations show a consistent pattern of improving results and the Group has implemented plans to support
continuing improvements or the losses relate to specific, identified non-recurring events;
· a deferred tax asset of £126m (2014: £117m) relating to provisions where current tax relief is only available as
payments are made. Of this asset, £72m (2014: £68m) relates to the John Crane, Inc. litigation provision, and £27m (2014:
£23m) relates to Titeflex Corporation. See note 23 for additional information on provisions; and
· a deferred tax asset of £26m (2014: £18m) relating to inventory where current tax relief is only available when the
inventory is sold.
The Group has not recognised deferred tax relating to deductible temporary differences in the UK amounting to £400m (2014:
£534m) and non-UK losses amounting to £126m (2014: £120m).
The expiry date of operating losses carried forward is dependent upon the law of the various territories in which the
losses arise. A summary of expiry dates for losses in respect of which deferred tax has not been recognised is set out
below.
Restricted losses
2015 Expiry of 2014 Expiry of
£m losses £m losses
Territory
- Americas 36 2019-2035 31 2016-2034
- Asia 12 2016-2022 6 2016-2021
Total restricted losses 48 37
Unrestricted losses
- operating losses 453 No expiry 433 No expiry
Total 501 470
8 Employees
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Staff costs during the period
Wages and salaries 731 718
Social security 86 86
Share-based payment (note 10) 9 10
Pension costs (including defined contribution schemes) (note 9) 31 32
857 846
The average number of persons employed was:
Year ended Year ended
31 July 2015 31 July 2014
John Crane 6,950 6,850
Smiths Medical 7,950 7,850
Smiths Detection 2,150 2,250
Smiths Interconnect 3,850 4,000
Flex-Tek 2,050 2,000
Smiths Business Information Services 250 200
Corporate 50 50
23,250 23,200
Smiths Business Information Services directly employs people working in its operations. All the costs of IT infrastructure
and support, including these employment costs, are reflected in reported divisional operating profit.
Key management
The key management of the Group comprises Smiths Group plc Board directors and Executive Committee members. Their aggregate
compensation is shown below. Details of directors' remuneration are contained in the report of the Remuneration Committee.
Year ended Year ended
31 July 2015 31 July 2014
£m £m
Key management compensation
Salaries and short-term employee benefits 12.7 9.0
Cost of post-retirement benefits 0.1
Cost of share-based incentive plans 2.7 3.4
No member of key management had any material interest during the period in a contract of significance (other than a service
contract or a qualifying third-party indemnity provision) with the Company or any of its subsidiaries. Options and awards
held at the end of the period by key management in respect of the Company's share-based incentive plans were:
Year ended 31 July 2015 Year ended 31 July 2014
Number of Weighted Number of Weighted
instruments average price instruments average price
'000 '000
CIP 589 706
ESOS 18 £10.97 31 £10.12
LTIP 1,374 1,629
SAYE 11 £9.19 10 £8.57
Related party transactions
There were no related party transactions in the year ended 31 July 2015 (31 July 2014: no transactions).
9 Post-retirement benefits
Smiths provides post-retirement benefits to employees in a number of countries. This includes defined benefit and defined
contribution plans and, mainly in the United Kingdom (UK) and United States of America (US), post-retirement healthcare.
Defined contribution plans
The Group operates a number of defined contribution plans across many countries. In the UK a defined contribution plan has
been offered since the closure of the UK defined benefit pension plans. In the US a 401k defined contribution plan
operates. The total expense recognised in the consolidated income statement in respect of all these plans was £28m (2014:
£30m).
Defined benefit and post-retirement healthcare plans
The principal defined benefit pension plans are in the UK and in the US and these have been closed so that no future
benefits are accrued.
For all schemes, pension costs are assessed in accordance with the advice of independent, professionally qualified
actuaries. These valuations have been updated by independent qualified actuaries in order to assess
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