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Annual Report and Accounts 1996
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page a
Contents
Smiths Industries at a Glance Inner Cover
Financial Highlights 1
Chairman’s Statement 2
Board of Directors 6
Business Review 8
Aerospace 8
Medical Systems 12
Industrial 16
The People of Smiths Industries 20
Financial Review 22
Directors’ Report 25
Statement of Directors’ Responsibilities 30
Auditors’ Report 30
Directors’ Emoluments and Interests 31
Accounting Policies 33
Consolidated Profit and Loss Account 34
Statement of Total RecognisedGains and Losses 34
Balance Sheets 35
Cash-Flow Statement 36
Notes to the Accounts 37
Five Year Review 50
Statement of Value Added 51
Analysis of Ordinary Shareholders 51
Organisation and Management 52
Notice of Annual General Meeting 54
Financial Calendar 56
This report illustrates how the three business groups of Smiths Industries –
Aerospace, Medical Systems and Industrial – have moved ahead during the
year by making intelligent use of the very latest technologies, by adding value to
gain competitive advantage, and by building strong customer relationships
through flexible and responsive service.
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page d
Smiths Industries at a Glance
Aerospace
Smiths Industries Aerospace designs and manufactures advancedavionics in the UK and the United States, and supplies the majorconstructors with integrated systems which enhance the performance oftheir aircraft. The group provides continuing product support to airlineand armed forces customers, and is also a leading supplier of navigationsystems for the naval and marine sector. It operates in four divisions.
Civil Systems works with customers including Boeing, McDonnellDouglas and Airbus to develop systems which help improve theperformance, safety and efficiency of modern commercial jet transportaircraft. While providing aircrews with vital information to help manageflight and navigation parameters, Smiths Industries products also controlthe complex functions where substantial computing power can relievepilot workload, including engine, fuel and electrical load management.
Defence Systems supplies similar products to military equipmentmanufacturers including McDonnell Douglas, Lockheed Martin, BritishAerospace and GKN Westland. A large proportion of the western world’sfront line aircraft are fitted with Smiths Industries avionics, including tactical,transport and training variants, and helicopters. Upgrading existing‘platforms’ with the latest systems is an increasingly important part of thebusiness, and the Company is a first-tier supplier often contracted directlyto the US Department of Defense and the UK Ministry of Defence.
World-wide Product Support for both civil and defence original equipmentis driven from Cheltenham, with other fully equipped repair centres atHeathrow, on the East and West coasts of the US and in Singapore to servethe Asia Pacific region, plus bases in Canada and Australia.
The Naval & Marine division trades as Kelvin Hughes and is a leadingsupplier of ships’ radar and navigation equipment, including integratedbridge systems for the largest tankers, container ships, luxury cruisers and ferries. It also supplies Admiralty charts to the world’s shipping fleets,now available on digital CDs for display on the company’s high-resolution monitors.
ContributionWith a continuing investment in R&D, Aerospace is well-placed to benefitfrom the present upturn in the civil market, while maintaining a strongorder book for defence equipment.
Contribution to Operating ProfitContribution to Total TurnoverSales by Origin UK 42% USA 44%
Continental Europe 13% Other overseas 1%
Smiths Industries is a world leader in advancedavionics, medical systems and specialised industrialproducts. It has achieved a strong record of growththrough investment in research and development,new manufacturing technology and closely focusedmarketing. While generating a healthy cash-flow,the Company has created shareholder value bycontinuing to build the existing businesses andmaking complementary acquisitions. Almost three-quarters of Smiths Industries’ sales are made tocustomers outside the United Kingdom, with theUnited States as its largest single market.
Geographical distribution of salesBy destination and including products made there, 43% of sales were in the USA, and 21% in continental Europe. Direct exports from the UKamounted to £205m.
Sales by Destination UK 25% USA 43%
Continental Europe 21% Other overseas 11%
27%37%
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page b
Medical Systems
Smiths Industries Medical Systems (SIMS) makes a wide range of
single-use, disposable devices used during surgery, critical and intensive
care, together with medical capital equipment, products for care beyond
the hospital environment, and for home healthcare. Manufacturing
takes place in the UK, continental Europe and the United States, but
sales are made on a worldwide basis, with Japan as one of the most
important markets.
SIMS has become a leader in meeting new approaches to healthcare –
including the trends towards less invasive procedures and post-hospital
continuing treatment at ‘alternate sites’ – while focusing on the need to
eliminate risk of cross infection in the healthcare process.
Single-use devices, the largest area of activity, are made by a number of
businesses grouped under SIMS Portex in the UK and SIMS Inc in the
United States. Portex, Concord and other leading brands are well-
recognised by clinicians for their premium quality and innovative design.
In addition to IVF devices, the Simcare range covers urology, ostomy and
incontinence products which help patients lead a relatively normal life.
In the US, SIMS Deltec makes ambulatory infusion pumps and
intravenous access ports which allow users to continue their treatment
without being permanently connected to hospital bedside equipment,
while SIMS Level 1 and RSP together provide temperature management
systems to keep patients at the correct core body temperature during
and after surgery.
Eschmann Equipment in the UK makes capital equipment for use in
hospitals and by GPs and dentists. Products include operating tables,
patient transfer systems, electro-surgery units and instrument sterilisers.
With a strong export record, the Eschmann name is synonymous with
the best operating room equipment at hospitals in many countries.
ContributionMedical Systems is the largest contributor to the profits of Smiths
Industries, and continues to thrive in a steadily expanding market for
healthcare. While securing margins which reflect its reputation for
premium products, it is actively pursuing new opportunities in the
developing world.
Industrial
The Industrial group has expanded rapidly in recent years through
acquisition and organic growth and stands alongside Aerospace and
Medical Systems as one of the Company’s three chosen areas of activity.
It makes a wide range of products at businesses based in the UK,
continental Europe and the United States. The group has focused on
adding value through the quality of its service to customers, providing
them with products which have been ‘customised’ to meet their
particular requirements.
The largest, Flex-Tek manufactures hosing, ducting and conduit in five
European countries and at three locations in the US. The products are
used for moving gases and fluids in industrial processes, air conditioning,
vacuum cleaners and for protecting electrical wiring in hazardous
environments. They are engineered to meet demanding specifications in
terms of durability and flexibility.
The Vent-Axia division is the UK’s leading manufacturer of ventilation
fans used for air extraction in industrial, commercial and domestic
premises. As well as the Vent-Axia company, the division includes the
Air Movement Group making large, plate-mounted fans, Sifan making
hand driers and central heating boiler fans, and Tutco in the United
States, supplying electrical heating elements for clothes driers.
Hypertac Interconnect has been formed around businesses in Europe
and the US all making the unique Hypertac connector. This high-integrity,
low insertion force device is used where multi-pin electrical connections
must be assured in safety-critical applications. These include avionics,
transportation, computer and telecommunications sectors.
Specialist Engineering comprises a number of high-margin niche
businesses manufacturing products, including electrical and electronic
components, which each address a specialised application. They
contain core competencies which can provide the opportunity for further
Industrial group expansion.
ContributionNow more clearly defined into these four divisions, the Industrial group
has achieved critical mass in its principal areas of operation. Further
gains can be made from the integration of recent acquisitions.
Contribution to Operating ProfitContribution to Total TurnoverContribution to Operating ProfitContribution to Total Turnover
More information on the Company organisation and senior management can be found on pages 52 and 53.
43%30% 30%33%
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page c
Turnover£M
1000
900
800
700
60092 93 94 95 96
Salient points from the accounts 1996 1995
Turnover £1,008.4m £899.3m
Profit before exceptional items £165.4m £138.5m
Profit before tax £170.4m £138.0m
Net borrowings/cash (£28.3m) £0.8m
Amount spent on acquisitions (net) £98.3m £51.6m
Earnings per share, before exceptional items 36.6p 30.7p
Operating profit to turnover 16.7% 15.7%
Dividend for the year 16.2p 14.4p
Dividend cover 2.2 2.1
Employees at year end 12,800 12,300
Market analysis Turnover Profit
1996 1995 1996 1995£m £m £m £m
Aerospace 377.1 374.2 45.3 40.3
Medical Systems 303.3 275.4 73.1 63.0
Industrial 328.0 249.7 49.7 37.6
1,008.4 899.3 168.1 140.9
Net Interest (2.7) (2.4)
165.4 138.5
Operating Profit£M
160
140
120
100
8092 93 94 95 96
Operating Profitto Turnover
%
16
15
14
13
1292 93 94 95 96
Financial Highlights
1
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 1
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 2
It is a real pleasure to report on another
very good year for Smiths Industries. All
three of our business groups improved
their performances, and increased their
profits and margins while preparing the
ground for further growth.
Record sales and profits were
achieved last year. Sales at £1,008m
(1995: £899m) were up 12%, pre-tax
profits before exceptional items at
£165m (£138m) were up 19%. Cash-flow
was once again very strong at £149m
(£140m) enabling us to make acquisitions
during the year of £104m for cash and to
fund the capital requirements of all three
of our business groups.
Earnings per share increased by 19%
to 36.6p (30.7p) before exceptional items.
The Board is proposing an increased
final dividend of 10.6p making a total for
the year of 16.2p, up 12.5% on last year.
On your behalf I should like to
thank all the Company’s employees for
their individual contributions to these
excellent results.
Aerospace
The Aerospace group earned profits of
£45m (£40m) on sales largely unchanged
year-on-year of £377m (£374m). Margins
increased from 11% to 12% and cash-
flow, which has been such a strong
feature in this group during recent years,
was once again very good.
Company-funded R&D expenditure,
mainly related to civil aircraft prog-
rammes was maintained at a high
level. Customer-funded R&D, principally
military, reduced.
The production rate on new civil
airliners has started to increase and a
further rise in new build rates is
confidently expected during 1997
reflecting the improvement in world
airline demand.
During the year we were selected to
participate in important programmes
which strengthened our position as a
first-tier supplier of avionics for key
military aircraft being developed and
manufactured in the US and Europe.
These programmes will provide valuable
work for our British and American
facilities in the years ahead. We
welcome the support of the British
Government for the Eurofighter 2000
and trust that an early decision will be
made to go ahead with production.
Our reputation for technological and
product quality with our main customers
is the cornerstone of this business and
I believe that we are very well placed to
benefit from increased demand in both
the military and civil sectors.
Medical Systems
The Medical Systems group increased
sales by 10% to £303m (£275m), profits
by 16% to £73m (£63m) and margins
to 24% (23%). This excellent perform-
ance reflects organic growth coupled with
an initial contribution from the Level 1
company acquired in October 1995.
Our UK-based single-use companies
maintained their very good export
performance, particularly to Japan and
Chairman’s Statement 3
• 19% rise in pre-taxprofits beforeexceptionals
• Outlook improves for Aerospace
• Margins remain goodin Medical Systems
• Industrial acquisitionsstrengthen corecompetencies
• Cash generationcontinues strong
SIR ROGER HURN CHAIRMAN & CHIEF EXECUTIVE
“The Board was very pleased to welcomeKeith Butler-Wheelhouse, who joined us in August 1996 and succeeds me as Chief Executive following the AGM”
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 3
share of the market for anaesthesia and
respiratory products there.
Industrial
A very good performance from all
divisions in the Industrial group is
reflected in overall sales growth of 31%
to £328m (£250m). This led to a profit
increase of 32% to £50m (£38m) with
margins holding up well at 15%.
During the year we established the
Hypertac Interconnect division following
the acquisition of the FRB Connector
group in the previous year. This
business is in the high-quality, high
specification electrical connector market
with production facilities in the UK, USA,
Germany, France and Italy. It is already
meeting its projected returns and is well
placed for the future.
Vent-Axia had another successful
year and now includes the Air Movement
Group acquired in April 1996. This
acquisition will enhance the product
range and distribution arrangements for
all air moving products.
Our tubing and ducting businesses
were enlarged with the acquisition of
the UK-based Adaptaflex company
in April 1996 and integration is
progressing well.
Acquisitions
The contribution from acquisitions has
been an important feature in the
Company’s growth in recent years and
I am pleased to report that our latest
additions have exceeded expect-
ations with further synergy benefits
still to come. During the year four
4 Chairman’s Statement
Earnings Per SharePence
38
34
30
26
2292 93 94 95 96
Dividends Per SharePence
16
14
12
10
892 93 94 95 96
Dividend Cover
2.2
2.1
2
1.8
1.692 93 94 95 96
the Far East, and new products are
generating significant contributions.
We countered the drop in demand
for medical capital equipment in the
UK, caused by National Health Service
cash constraints, by concentrating
on exports. In the North American
market for single-use devices,
competition has been intensified by
consolidation among customers into
fewer, larger groups of healthcare
providers: we have responded by
focusing on higher added-value
products. We have increased the equity
investment in our Japanese distributor
to improve our already substantial
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 4
companies joined Smiths Industries –
MJA Dynamics Ltd in Aerospace, Level
1 Technologies Inc in Medical and both
Air Movement Group Ltd and Adaptaflex
Ltd in the Industrial group. The task
of absorbing these companies is
proceeding smoothly.
The Board
The Board was very pleased to
welcome Keith Butler-Wheelhouse who
joined us in August 1996. He succeeds
me as Chief Executive following the
AGM on 19th November 1996. I will
continue as Chairman and I look
forward to working closely with him in
the future.
Sir Alex Jarratt retires from the
Board at the AGM and I would like to
express my warmest thanks to him for
his enormous contribution to the
success of Smiths Industries. He joined
the Board in 1984 becoming Chairman
in 1985 until I succeeded him in 1991.
He has set an outstanding example
both as Chairman and as our Senior
Non-Executive Director. During our
working relationship I very much valued
his wise counsel and patient guidance
which will now be greatly missed.
Prospects
Good order books for civil airliners,
particularly those manufactured by
Boeing, will follow through into
increased build rates next year and we
shall benefit from this upturn.
The rising demand from developed
and developing markets for our medical
products will keep up the sales
momentum. Innovation and new
products coming on stream will further
enhance this growth.
The Industrial group, assisted by
recent acquisitions which add to its
geographical coverage and product
range, will continue to grow strongly.
Excellent cash-flow used both for
acquisitions and for the growth
requirements of our three business
sectors will continue to be a feature of
the Company.
Overall, I have confidence in the
outlook for increases in sales, profit and
earnings per share.
Sir Roger Hurn
Chairman & Chief Executive
5
“Excellent cash-flow used both for acquisitionsand the growth requirements of our threebusiness sectors will continue to be a featureof the Company”
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 5
Sir Roger Hurn
Aged 58, British. Chairman &
Chief Executive. He joined the
Company in August 1958 and was
appointed to the Board in March
1976. He was appointed Chief
Executive in August 1981, and to
his present position in November
1991. Sir Roger will continue as
Chairman when he relinquishes the
position of Chief Executive following
the Annual General Meeting on
19 November 1996. He is a
non-executive director of ICI plc
and Glaxo Wellcome plc.
Keith Butler-Wheelhouse
Aged 50, British. He joined the
Company in August 1996 as an
executive director and, following
the Annual General Meeting on
19 November 1996, will be
appointed Chief Executive.
He was previously President and
Chief Executive Officer of Saab
Automobile in Sweden and prior
to that had been Chairman & Chief
Executive of Delta Motor Corporation
in South Africa. He remains a non-
executive director of that company.
Norman Barber
Aged 57, British. Chairman,
Aerospace group. He joined the
Company in April 1991 and was
appointed to the Board in July
1991. He was previously Managing
Director of British Aerospace
(Dynamics) and British Aerospace,
Military Aircraft Division. He is a
non-executive director of BSG
International plc and is Deputy
President of the Society of British
Aerospace Companies (SBAC).
Sir Alex Jarratt, CB DL *†
Aged 72. British. Non-executive
director and Chairman of the
Company’s Senior Appointments
and Remuneration Committee.
He joined the Board in February
1984 and was Chairman of
the Company from August 1985
to November 1991. Previously
Chairman of Reed International plc,
he is currently Chairman of the
Centre for Dispute Resolution,
and Chancellor of the University
of Birmingham. Sir Alex will
retire from the Board at the
Annual General Meeting on
19 November 1996.
George Kennedy
Aged 56, British. Chairman,
Medical Systems group.
He joined the Company in
January 1973 and became
Managing Director of the medical
systems companies in August
1980. He was appointed to the
Board in May 1983. He is a
non-executive director of the
Kent and Canterbury Hospitals
NHS Trust and of Carclo
Engineering Group plc where he
is Deputy Chairman. He is
currently Chairman of the
Association of British Healthcare
Industries (ABHI) and is a member
of the Department of Health’s
Medical Devices Agency.
Roger Leverton *†
Aged 57, British. Non-executive
director. He was appointed to
the Board in December 1994.
He is Group Chief Executive of
Pilkington plc.
Einar Lindh
Aged 51, British. Chairman,
Industrial group since February
1996 when he was also appointed
to the Board. He first joined the
Company in 1973, leaving in 1979
to join Great Universal Stores plc.
He returned to Smiths Industries
in 1983 as Financial Controller of
the Medical Systems group and
in 1990 he became Managing
Director of the principal Medical
Systems group company,
SIMS Portex Ltd.
Keith Orrell-Jones *†
Aged 59, British. Non-executive
director. He was appointed to the
Board in December 1992. He is
Group Chief Executive of Blue Circle
Industries PLC. He will become
Chairman of the Senior Appointments
and Remuneration Committee in
succession to Sir Alex Jarratt.
Alan Pink *†
Aged 58, British. Non-executive
director. He was appointed to the
Board in December 1993. He is an
executive director of Zeneca Group
plc. He is a Fellow of the Institution
of Chemical Engineers.
Alan Thomson
Aged 50, British. Financial
Director. He joined the Company
and was appointed to the Board
in April 1995. He was previously
Finance Director of the Rugby
Group plc and prior to that had
worked for Courtaulds plc, Rockwell
International Corporation and
Raychem Ltd. He is a non-executive
director of Laporte plc.
Sir Peter Thompson *†
Aged 68, British. Non-executive
director and Chairman of the
Company’s Audit Committee.
He was appointed to the Board
in September 1986. He is
Chairman of FI Group plc,
Community Hospitals Group plc,
M33/31 Group and Child Base Ltd.
He is a non-executive director of
Aegis plc and Brewin Dolphin
Holdings plc. He is President
of Pro Share Ltd.
Secretary
Alan Smith
Registrar
Lloyds Bank Registrars
The Causeway
Worthing
West Sussex BN99 6DA
Auditors
Clark Whitehill
Registered Office
765 Finchley Road
London NW11 8DS
Incorporated in England
No. 137013
†Audit Committee
*Senior Appointments and Remuneration Committee
6 Board of Directors
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 6
7
Support from non-executive directors benefits the strong team of executive directors and ensures high standards of corporate governance
First Row (left to right):
Sir Roger Hurn, Keith Orrell-Jones,
Norman Barber, Roger Leverton.
Middle Row (left to right):
Sir Peter Thompson, George Kennedy,
Alan Pink, Alan Thomson.
Bottom Row (left to right):
Keith Butler-Wheelhouse (becomes
Chief Executive following AGM),
Sir Alex Jarratt (retires from the
Board at AGM), Einar Lindh
(became Chairman, Industrial
group February 1996)
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 7
With the strong
recovery in the civil
market and new
defence orders, the
Aerospace group is
seeing the rewards of long-term
investment in technology and facilities.
Profits increased by 12% to £45.3m on
steady sales of £377.1m (£374.2m) and
the business continues to generate a
strong cash-flow. We have maintained
spending on R&D at a high level, and
our commitment, even during the recent
difficult years, has led to a series of new
business wins.
Now profitable again, airlines are
replacing older planes with new aircraft
which carry more of our advanced
avionics. Meanwhile the decline in
defence spending has also slowed.
Although the emphasis is on upgrades,
delayed decisions on new equipment
are now taking shape.
In both defence and civil areas,
we are positioned to benefit. The
Aerospace group is a world leader in a
number of technologies, our reputation
with customers is good, and our product
support keeps us highly visible while
generating a valuable stream of income.
Although employment levels remain
more stable than earlier in the decade,
reorganisations have continued, including
the integration of the engine and fuels
business within the Civil Systems division.
The Aerospace group now operates
as four divisions: Civil Systems, Defence
Systems, Product Support and Naval
& Marine. The split of defence and civil
business is 60/40, with the longer-term
outlook moving to 50/50.
Civil Systems
Civil Systems is building on its successes.
The selection of our flight management
systems and autothrottle for the new
Boeing 737 6/7/800 series holds far
reaching importance: it is the fastest-selling
aircraft in the world; flight management is
an area of intense focus; and our systems
are central to a new approach to aircraft
navigation which is rapidly becoming a
world standard. There are also good
prospects for retrofitting existing aircraft.
The electrical load management and
fuel quantity indicating systems we
supply for the highly successful Boeing
777 have contributed greatly to the
improved performance of the group.
Orders are strong, and further buoyed
by a credibility with Boeing that makes
us a serious contender for new models.
Improvements in our position at Airbus
are expected to continue. We supply
fuel quantity systems for the smaller
A319/320 series and have just secured
a contract for the first basic-fit flat-panel
display instrument on any Airbus aircraft,
initially for the longer range A330/
A340 models.
Another notable win was an order for
commercial ‘off-the-shelf’ flat-panel
displays and other products for the new
Joint Primary Air Trainer aircraft, of
which over 700 will be built for the
US AirForce and Navy.
The engine controls business –
including the joint venture with Rolls-
Royce, RoSEC – is providing the digital
engine control unit for two new engines
now undergoing certification. Heavy
development costs have weighed on
business performance, but the products
are performing well.
Defence Systems
Defence Systems recorded excellent
progress, building on the inherent
strength of our relationships as first-
tier supplier to the American airframe
manufacturers, the Department of
Defense, the Ministry of Defence, British
Aerospace and GKN Westland.
8 Business Review • Aerospace
Aerospace
• Profits up by 12% to £45.3m
• Boeing relationshipcontinues strong
• Defence Systemsmakes excellentprogress
• Product Support winsagainst competition
• Increase in shipbuilding brings orders
NORMAN BARBER
CHAIRMAN
AEROSPACE GROUP
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 8
Among the most important continuing
applications for our avionics are for the
E/F versions of the F/A-18 (of which the
US Navy plans to buy at least 1,000),
the Apache AH-64 helicopter in its latest
Longbow version, the Hawk and its US
counterpart the T-45 Goshawk, and the
Tornado – currently being upgraded with
our latest displays.
Contracts for new business have
included a substantial avionics package
on the RAF’s Nimrod maritime patrol
aircraft, and a health and usage
monitoring system for the UK’s Chinook
helicopter fleet, with large potential for
further business on UK and other
helicopters. Our acquisition of a UK
software specialist, MJA Dynamics,
helped secure this contract. In Europe,
the Eurofighter 2000 and EH-101
helicopter moved towards full-scale
production, both extensively equipped
with our most advanced avionics. In the
US, we are also involved with the F-22,
and the Joint Strike Fighter programme.
Our opportunities have not been
constrained by the continuing consolid-
ation and cross-border alliances among
manufacturers, and may increase with
the emergence of a more commercial
approach to procurement.
Product Support
The Product Support division is
performing well, with more than half of
its business coming from the resurgent
commercial airlines. Although competition
is fierce, we have the advantage of best
access to our own product lines. The
division has invested heavily in information
technology, which allows it to track
components on a world-wide basis.
Naval and Marine
The Naval & Marine division, principally
trading as Kelvin Hughes, is also
benefiting from a rising market and a
modest increase in shipbuilding. Kelvin
Hughes has been increasing its market
share in navigation and radar displays
by introducing integrated systems for
greater safety and efficiency.
In the Far East, the container line
Evergreen has ordered our radar,
electronic charts and navigation
systems for 15 new vessels and a
further 15 re-fits. The unique Integrated
Bridge has been specified for new
P&O container ships, BP tankers, and
a number of high-speed ferries and
cruise ships.
The Naval business has orders from
navies around the world, while the
Charts and Maritime Supplies operation
is profiting from the rapid changeover to
electronic charts, for which we also
make the display units.
Outlook
This is the most promising outlook for
the Aerospace group for several years.
We have proved the value of our
decision to concentrate on internal
efficiency while investing for the future,
and are now experiencing an upturn
which we believe will continue into the
next century. Further, as volumes
improve – if only modestly – we expect
to be able to raise margins while
containing our fixed costs.
9
We have proved the value of our decision toinvest for the future throughout the recessionin both commercial and defence sectors, andwill benefit from the upturn
AerospaceTurnover
£m
350
300
250
200
15092 93 94 95 96
AerospaceProfit
£m
44
42
40
38
3692 93 94 95 96
SI/1 Annual vAW colour5 PL2 3/3/97 5:35 pm Page 9
10 Business Review • Aerospace
The intelligence we channel into advanced technology builds a strong foundation for the future
Health and safetyWith our advancedelectronic ‘health andusage’ monitoring system,we are taking a world leadin the introduction of in-flight diagnostics forhelicopters. The system
monitors nearly 200parameters vital to theaircraft’s operation – suchas rotor track and balance– continuously collecting,processing and storing databoth for routine maintenanceand in a crash-survivable
‘black box’. The UK’sMinistry of Defence haschosen it for the RAF’sChinooks and is reviewingother options, while the USForces are considering itsinstallation on severalthousand military helicopters.
High-tech customerserviceSuppliers to civil aircraftmakers are contracted tomeet stringent turnaroundtimes for repairs, since this is crucial to an airline’sability to keep the aircraftflying. Already industryleaders in repairperformance, our ProductSupport teams haveanalysed and streamlinedinternal processes over thepast two years so thatsome 90% of repairs arecompleted within 10 days. In the coming financial year,we aim to reach 95%.
Developing a clear viewOur very latest flat-paneldisplay technology – Active Matrix Liquid Crystal– halves the powerrequirement, weight anddepth of previoustechnologies, and meets thetight criteria of defencecustomers at a highly
Flat panel display: Halving depth releasesimportant space in newaircraft, but the screen sizealso fits existing cockpits
A. Data Storage Unit: Located behind pilot cockpit
B. Rotor Sensors Monitoring rotor track & balance
competitive price. Morereliable and versatile thanconventional displays, they can present video,text, graphics and dataclearly and in multiplecolours – helping pilots to assimilate flight-criticalinformation quickly andaccurately.
FCR
BRT
DAYNT
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5 Minutes: Aircraftarrives at gate. Ground engineerdiagnoses fault andidentifies unit to beremoved.
15 Minutes: Faultyunit is removed fromflight deck and takento stores.
30 Minutes: Faulty unitexchanged for a goodone, (finding ProductSupport’s ‘turn aroundtimes’ have been fullymet). Replacement unit is now installed on aircraft.
A. Multi-function airspeed indicatorB. Multi-function altimeterC. Multi-function vertical speed indicatorD. Primary Engine DisplayE. Fuel quantity/cabin pressure engine instrumentF. Secondary engine display/collision warningG. Standby airspeed indicatorH. Standby altimeter
45 Minutes: Totalelapsed time typically 45 minutes for a Boeing 737 type aircraft.
Chameleon TechnologyIntelligent software is thebase for an integrated cockpitdisplay with interchangeableunits. Their function isdetermined by the connection,thus reducing the costs anddelays associated withnormal replacements andspares. We are the world’slargest supplier of multi-function display units –leading the industry trendaway from hard-wired,single-task devices. Raytheonselected our avionics for itsnew trainer aircraft for theUS AirForce and Navy: aninitial award for 141 trainersexpected to rise to some700 aircraft over 20 years.
A B
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SI/1 Annual vAW colour5 PL2 3/3/97 5:36 pm Page 10
11
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In high-technology avionics and aeronautics, product leadership is won byinvesting in R&D projects to exploit advanced technologies. Through the quality of our R&D we hold patents on a number of developments now central to the industry’s future, and have taken a lead in many innovative applications. The resulting orders for standard equipment on aircraft with long production runs are a solid base for future revenue streams.
Perfect positioningOur Communications,Navigation and Surveillanceand Air Traffic Managementsystems are years ahead ofthe competition. Involving anumber of Smiths Industriespatents, they combine allelements of the completeflight management systemsnow seen as essential forthe future as a means ofsaving cost and relievingpressure on airspace andairport capacity. Our systems
use the Global PositioningSatellite to determine anaircraft’s exact position –making it possible to reduceaircraft separation withsafety, and enabling aircraftto save time and fuel costsby adopting their optimumaltitude and direction.
Armrest control Innovative engineering at ourmarine equipment businesshas given us a clear lead.We hold the patent for anergonomic control interfaceto a sophisticated new radarsystem featuring highresolution, 50-target trackingcapability, and compactsize. With simple controlsmounted in a pod in theseat armrest, users movethe cursor on the screen toselect a function. Its marketis mid-merchant and high-speed craft, where seatedcrew are unable to accessconventional multi-switchcontrol panels. The displayis software driven, thusoffers the flexibility to marketseveral variants from onegeneric design.
D. Ground Station:Relays signal to airtraffic control
E. Air Traffic Control
A. Display: tracks up to 50 targets at any one time
B. Trackerball
C. Operation: The thumbmanipulates the trackerball
A. Flight management system: integrated withglobal positioning satellite
B. Aircraft: Updates positionvia relay satellite and/ordirectly with air traffic control
C. Satellite: Follows theaircraft’s flightpath
A
C
B
C
A
D
E
B
SI/1 Annual vAW colour5 PL2 3/3/97 5:37 pm Page 11
Healthcare is high
on the political
agenda in most
countries, and thus
commands an in-
creasing share of GDP. While this
generates a world market for medical
devices and equipment that is growing
at 6% a year, Smiths Industries
Medical Systems is comfortably out-
performing that rate. One force behind
our success is the group’s highly
developed marketing skills: nearly two-
thirds of UK output is exported, and US
subsidiaries are also becoming more
export-oriented. A second force is our
ability to add value to existing products
to make them the specialist’s choice.
This is a difficult business for
outsiders to enter: there are major
players already in place; government
approval procedures are complex; and
patents enable product differentiation to
be protected. Because of this, we
commit considerable resources to
regulatory affairs and to observing best
medical practice. European Community
(CE) marking, which we now use across
the majority of the product range, has
simplified our selling within Europe –
benefiting our efficient production
in the UK, US and Germany.
Medical Systems increased its
profits by 16% to £73.1m. Sales
increased to £303.3m (£275.4m),
delivering a margin on sales of 24% –
exceeding the 20% target we set during
this rapid expansion phase. There were
three elements to the improved
performance: the first full year’s profits
from companies acquired in the
previous year, part-year profits from
SIMS Level 1, and improvements in
existing businesses.
The performance of all our recent
Medical Systems acquisitions has met
our initial expectations – exceeding their
financing costs and producing margins
that support our overall performance.
Single-Use Products
In the single-use device companies in
the UK and continental Europe we have
recently completed a major reorgan-
isation. One effect will be a sharper
marketing focus, with SIMS Portex Ltd
now the umbrella company for the
complete range of single-use products –
Portex, Simcare, Wallace, Concord,
Eschmann Healthcare, Avon and PVB
devices, plus European sales of products
imported from our US companies.
For both our UK and continental
companies, product development, sales
and marketing, and manufacturing
strategy are all now brought under the
streamlined SIMS Portex management
based at Hythe in Kent. In parallel we
are reviewing our world-wide marketing
activities and have made good progress
in areas including South Africa, Russia,
eastern Europe and China.
Japan
Japan continues to be an important
market, and our equity investment in the
distributors Japan Medico has recently
been doubled. We sell all of our
European products through this highly
successful distribution enterprise,
together with the US-made products
likely to find a valuable niche in Japan.
Capital Equipment
Eschmann Equipment has found the UK
market difficult during the hiatus
between NHS Trusts exhausting their
initial ‘set-up’ capital grants and creating
their own investment programmes. The
company has a healthy overseas order
book and is currently concentrating on
exports, plus its strong business in
maintaining installed equipment.
12 Business Review • Medical Systems
Medical Systems
• Profits up by 16% to £73.1m
• Sales increased 10% to £303.3m
• Profit on sales 24%
• Acquisitions meetexpectations
• Growth potential innew markets
GEORGE KENNEDY
CHAIRMAN
MEDICAL SYSTEMS GROUP
SI/1 Annual vAW colour5 PL2 3/3/97 5:37 pm Page 12
North America
North American operations are grouped
under SIMS North America, based in
Keene, New Hampshire. They all supply
plastic consumable devices which
generate a continuous profit stream,
although some of the companies are
better known for the electronic equipment
they make.
SIMS Inc – comprising Concord,
Portex and Intertech – makes single-
use disposables for anaesthesia and
critical care. A unified sales force sells
these devices throughout the US, often
combining groups of products to
provide a more competitive offering. As
a result, we have secured a number of
longer-term supply contracts.
Margins in this highly competitive
environment remain good, although
slightly lower than for Medical Systems
as a whole. One way that we are
addressing this is by investing $15
million in a new main manufacturing
complex in Keene. Meanwhile, we are
concentrating on products with higher
added value, such as the Per-Fit (TM)
kit introduced in the US during the year
and expected to match the success
of the similar UK-made percutaneous
tracheostomy kit.
In its second full year with Smiths
Industries, SIMS Deltec produced
another outstanding performance as the
market leader in the rapidly growing
sector of infusion devices for care
beyond the hospital environment.
Alongside its existing range, the
company has developed a new
ambulatory unit – the Prizm pump – sold
as a premium product with advanced
features. Once in use, Deltec’s pumps
generate a continuing demand for the
disposable plastic cassettes which
contain the prescribed medicines.
Since our purchase of SIMS Level 1
for $57 million in October 1995, its
performance has more than matched
our expectations and we see wide
opportunities for further growth. Like
Deltec, it supplies hardware and then
generates ongoing business from the
supply of single-use sterile items. Blood
and other fluids must be infused at a
temperature close to the patient’s own
to avoid the risk of hypothermia, and
Level 1 products have the best warming
technology yet developed.
These companies have good export
prospects, and new distribution arrange-
ments will enable them to realise their
full potential.
Outlook
Medical Systems is a dynamic business
in a buoyant market. We can maintain
good margins and there are still
opportunities to take the single-use
philosophy into unexploited markets.
South Africa is one example, and we are
already building sales in Asia Pacific
through our offices in Singapore and
Taiwan. We view our growing business
in Japan as the start of a trend in the
Pacific region as a whole. The outlook
and opportunities for the group remain
as good as ever.
13
The world market for medical devices andequipment is growing at 6% a year; we arecomfortably outperforming that rate.
Medical SystemsTurnover
£m
300
250
200
150
10092 93 94 95 96
Medical SystemsProfit
£m
70
55
40
25
1092 93 94 95 96
SI/1 Annual vAW colour5 PL2 3/3/97 5:37 pm Page 13
14 Business Review • Medical Systems
Intelligent product development adds value forpatients and healthcare professionals
Barrier against contaminationDesign refinements transferredfrom ‘clean room’ manufacturingprinciples take the efficiency ofPortex’s Thermovent Bacterial/Viral Filter to 99.99% – providingalmost total protection againstcross-infection for patients, staffand equipment during medicalprocedures that involve managing the airway passagefrom mouth to lungs. Connectedto a tracheal tube inserted into a patient’s airway, the filtermaintains normal humidity andtemperature levels for ingoing air,while removing contamination.
The leading choiceThrough continuous innovation,SIMS Deltec has widened thechoice of PORT-A-CATHproducts to match broadclinical needs and cost targetsin the healthcare industry –commanding a leading role inthis field for over a decade.PORT-A-CATH products aresurgically implantable accessports that reduce damage and trauma for patients whowould have needed repeatedinsertions of a needle forexample into a vein.
A. P.A.S. PORT implantable access systemdesigned exclusively for the arm
B. PORT-A-CATH venous access system port
C. Cross section of PORT-A-CATHdisplaying septum designed for needleretention and stability.
A. Plan of filter
B. Cross section of filter
C
B
A
A
B
septum
Complete kit for safer careTracheostomy involvesinserting a tube into a patient’sneck to enable them tobreathe. Although a relativelycommon procedure, itrequires patients to be movedto a fully staffed operatingtheatre. Portex has advanceda less invasive method –percutaneous tracheostomy– performed quickly at thebedside with less stress andfewer complications for the patient, and thus lowercosts for the hospital. Ourinnovations include a completeprocedure kit – incorporatinga unique forceps design thatallows the airway to beopened for insertion of the tube.In addition to strong UK sales,the kit’s ingenuity has openednew doors in export markets.
SI/1 Annual vAW colour5 PL2 3/3/97 5:37 pm Page 14
15
STOPSTART ENTER OPTIONS
LOCK NEXT
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Innovative developments from Smiths Industries Medical Systems have far-reaching impact on the treatment and comfort of patients in hospital and in their daily lives. Recognised both for intelligent advances in conventional medical equipment and inspired new ideas, SIMS is increasingly the supplierof choice for healthcare organisations.
12 30 12 30140 60
Combating HypothermiaTwo SIMS companies in the US, Level 1 andRespiratory SupportProducts – are capitalisingon the growing recognitionthat managing a patient’stemperature during surgeryor emergencies contributesto speedy recovery. Theirproducts bring together a revolutionary technique for delivering warmed blood or fluids at precisetemperatures; a disposablethermal blanket warmed byair pumped around itstubular construction; and atemperature monitor withprobes and sensors.
Medication with mobilityA portable infusion pump,worn on the body, delivers ameasured dose of medicationto a patient in hospital or athome. It allows patients tolive as normally as possibleand helps cut hospital andhome nursing costs. Havingpioneered this technology,SIMS Deltec, Inc. this yearadvanced with a new pump– the CADD-Prizm(TM) PainControl System. It is easilyprogrammed to administerthe correct drug dosage andrecord data on the pump’sactivity for review by themedical team.
Triple PowerIn electrosurgery, an electricalcurrent is passed to the tip of a surgeon’s instrument.Eschmann’s expertise is indesigning waveforms thatproduce a precise effect for a specific surgical technique. Its latest system incorporates
three generators that can be used simultaneously forcutting and coagulation –important in trauma caseswhere a team of surgeonscan work at the same time using their ownindependently controlledpower source.
A. Disposable IntravenousTubing Set
B. Intravenous fluid warmer
A. Electrosurgical unitB. Active electrodeC. Dispersive electrode plate
A. CADD-Prizm(TM) PumpB. Belt mounted location C. Catheter port into upper arm
A
B
C E
D
C. Disposable full body blanketD. Warm air hoseE. Convective warming unit
A
B
C
A
C
B
SI/1 Annual vAW colour5 PL2 3/3/97 5:37 pm Page 15
The Industrial group
profit of £49.7m
represented a 32%
increase over the
previous year. The
established businesses continued their
growth patterns with a further profit
increase of 12% through both sales
growth and productivity improvements.
There were two acquisitions during
the year: the Air Movement Group,
which cost £46.6m has joined the
Vent-Axia division; while Adaptaflex,
bought for £21m, has joined Flex-Tek.
Both these acquisitions meet the group
strategy of growing our established core
businesses by expanding our range of
high-quality products supported by first-
class service.
The business now operates in four
divisions. Each has reached critical
mass through a combination of
acquisitions in our areas of core
competence and development of the
existing operations.
Flex-Tek
Flex-Tek manufactures flexible ducting,
hosing and electrical conduit in five
European countries and three sites in
North America. The business units
are close to their customers both
geographically and in terms of their
ability to tailor products to specific
needs. This competitive advantage
is continually strengthened by the
extensive inter-change of commercial
and technical information between
companies.
Interplas – the European group of
manufacturing companies acquired
last year – has integrated well, and
continues to generate profits at the level
expected. Flexible Ducting in the UK
and Flexible Technologies in the US
both increased their sales volumes,
aided by requirements for better
environmental, health and safety
standards. Adaptaflex – which employs
138 and is based near Birmingham –
has joined alongside Kopex to offer
an extended range of high performance
conduit and fasteners for hazardous
and safety-critical applications. This is
an area of growing demand: durable
protective conduits are becoming a
standard safety measure across a range
of applications as wide as the uses of
electrical and fibre-optic cables.
Adaptaflex has brought a versatile
and complementary range of products
to the division.
Vent-Axia
The Vent-Axia division is a mainly
UK-based operation making extractor
fans and associated air-moving units.
The Vent-Axia company itself – a
Smiths Industries company since 1992 –
has been capitalising on its well-
known brand name as a base for
introducing new products for the home,
including an innovative heat-recovery
system. This year’s acquisition of the
Air Movement Group, based near
Birmingham and with 350 employees,
has increased the size of the division
substantially. Its large, industrial-scale
units add an important new dimension to
the business by complementing Vent-
Axia’s range of fans for commercial and
domestic premises. AMG also brings a
nationwide distribution network through
which we can offer a highly responsive
customer service. The original Smiths
Industries fan company, Sifan, which
makes domestic boiler fans and hand
driers, was the kernel around which
this substantial division has grown.
It now extends to the US, where our
heating element producer Tutco con-
tinues to expand. Tutco joined Smiths
Industries in 1994, and is the market
leader in its field.
16 Business Review • Industrial
Industrial
• Profits up by 32% to £49.7m
• Rising demand forflexible conduit
• Air-moving businesswidens
• World-wide reach for Hypertac
• Good margins in niche operations
EINAR LINDH
CHAIRMAN
INDUSTRIAL GROUP
SI/1 Annual vAW colour5 PL2 3/3/97 5:37 pm Page 16
Hypertac Interconnect
During the year we established Hypertac
Interconnect as a separate division of the
Industrial group. It comprises the FRB
connector businesses acquired at the
end of the previous year and our exist-
ing connector companies in the UK
and US. The Hypertac connector is a
unique product increasingly in demand
as the market for reliable electronic
connections widens in virtually every form
of transport and mobile communications.
We now have a commanding position
world-wide with six operations in five
countries all making products using the
Hypertac low insertion force contact.
The first full-year performance of these
businesses exceeded our expectations.
We expect to take advantage of
the opportunities to improve the
productivity of the combined businesses
further by exploiting the many
marketing and operational synergies.
One of the major opportunities will be
the international expansion of our
products’ applications.
Specialist Engineering
The Specialist Engineering division now
encompasses a number of smaller
niche businesses successfully supplying
electronic, electrical and mechanical
products. These companies perform well
and deliver good profit margins. Some
are the seed-bed for core competencies
which may form a base for enlarging our
activities. Equally, businesses which do
not fit the future strategy will be given
the opportunity to achieve success
independently. During the year, we
disposed of two businesses which were
no longer within the group’s areas of
focus – one manufacturing consumer
electrical devices and the other, spark
plug production equipment.
Outlook
The developments during the year give
the Industrial group a clear logic to its
structure. Two of its divisions now each
have a turnover well in excess of £100m
a year: one is the clear UK leader in
ventilation, and the other a major
international supplier of specialist ducting.
In a third area we are building another
world-wide business based on a
proprietary, high-integrity connector that
is a vital component in many existing
and emerging electronics applications.
Completing the current picture is the
group of very profitable, cash-generating,
niche engineering businesses.
The outlook for the future remains
positive. The priority over the next year
will be to integrate fully the recent
acquisitions with the established core
businesses and maximise their potential.
The Industrial group will continue to
seek further acquisition opportunities
which are consistent with the group’s
high standard of performance.
17
Our priority over the next year is to fullyintegrate the recent acquisitions with theestablished businesses and maximise their potential
IndustrialTurnover
£m
300
250
200
150
10092 93 94 95 96
IndustrialProfit
£m
50
40
30
20
1092 93 94 95 96
SI/1 Annual vAW colour5 PL2 3/3/97 5:37 pm Page 17
18 Business Review • Industrial
By responding intelligently to market opportunities we gain a competitive advantage
The world’s most reliableconnectionMulti-pin connectors mustmake continuous contact forsecure transmission of powerand data. Yet through vibrationor frequent unplugging, the griploosens. Low insertion force,reliability and long life are usuallymutually exclusive, yet Hypertacconnectors achieve them all.With fingertip effort, pins pushinto a network of wires whichhug the pins’ surface to createhundreds of unshakeablecontacts, and let connectorsglide in and out for 60 times theusual lifespan. Where the penaltyfor failure is high, Hypertactakes a clever idea to newheights and depths: aircraftcrash recorders, space probessuch as Calypso, and under-ground drill-head guidance.
New features find new markets
By working with customers,Flexible Technologies in
South Carolina developshoses with exclusive featuresthat add value to products. This vacuum cleaner hose for Electrolux USA carries
wires for multiple electricalconnections to the head of
the cleaner, putting controls at the user’s fingertips.
In recent years, design ideaslike a self-retracting hose
have brought growth fromorders for upright vacuumcleaners, which are 70%
of the market.
Fully planned in a few hoursVent-Axia combines its strongbrand name with advancedCAD systems and technicalexpertise to deliver exceptionalcustomer service, and is highlysuccessful in meeting the
growing demand for energyefficiency in homes andapartment blocks. From an on-site survey, Vent-Axiaspecialists can downloadinformation through thetelephone line and produce adetailed design drawing in aslittle as three hours. With everycomponent identified fromstock, the design is a workingplan for installers, a base forinvoicing, and a reference forspare parts and extensions.The central component is aheat exchanger that uses the heat from outgoing air to warm incoming fresh air –minimising heat loss.
SI/1 Annual vAW colour5 PL2 3/3/97 5:39 pm Page 18
19
Companies in this group differentiate themselves through the added value of theirservice as well as the quality of their products. By identifying new potential in nicheapplications and customising products to the precise needs of customers, Industrialgroup companies have profited in their fiercely competitive marketplaces by liftingtheir products above the commodity level.
No need to compromiseBy designing and manufacturingits components in-house,Adaptaflex can respond atmarket-leading speed, using its outstanding ability tocustomise its flexible conduit systems to match precisedesign and price criteria.Reliable and durable in all staticand flexing applications, theconduit is used wherever thereis a need to protect electricalcables or fibre optics inbuildings, machinery, plant,roads, and railways. Customerneeds are constantly fed backinto product development –resulting in such simply effective products as this push-on Adaptalock nylon fitting.
Designed by customersThe Air Movement Groupmakes fans as large as a metre in diameter –expanding Smiths Industries’air-handling capabilities intothe industrial marketplace. Following a wide survey
that collected customers’design criteria for the perfectproduct range, the companydeveloped multi-purpose units that deliver the featurescustomers see as essential –quality, high specification, price,technical support and delivery.
SI/1 Annual vAW colour5 PL2 3/3/97 5:39 pm Page 19
20 The People of Smiths Industries
Although widely spread by geography
and variety of business, Smiths Industries
is a close community of nearly 13,000
people whose individual successes are
building the success of the Company.
We offer every encouragement for
personal progress: internal communi-
cations within the businesses is
well established; information about
performance and objectives is shared
at all levels; ideas and dialogue are
encouraged and employee councils
are widespread.
In May this year we held our first
European Communication Forum in
Munich, with 22 delegates from eight
countries joined by the Chairman at an
informal session. Underlining our
constructive relationship with trade
unions, we also welcomed a visit from
John Monks, secretary general of the
Trade Union Congress, to SIMS Portex
during the year.
Good communication leads to a
better understanding of individual
expectations and capabilities, so that
training and development can be fine-
tuned. The responsibility for equipping
employees with the right skills is taken
seriously. We do not expect ‘natural-
born’ salespeople: instead we offer a
combination of intense training and
experience to develop the skills needed
to present our products and to deliver
the responsive service that is the
hallmark of our businesses.
In her negotiations with local
authority housing officers for the
installation of complete energy-efficient
ventilation schemes in large public
buildings, Vent-Axia’s Catherine Lodge
uses a hand-held computer to calculate
specifications on-site and provide direct
input for fast quotations.
Training
We complement business-level training
with corporate programmes aimed at
developing future senior managers early
in their careers. The past 18 months
have seen 25 management courses
bringing together people from across
the Company to study such topics as
advanced negotiating skills and financial
appreciation, equipping them with the
skills they need to make progress in
their field.
Nearly 50 people have participated
in our development centres, where
their potential can be matched to the
opportunities. This gives us the ability to
promote from within in many cases, and
thus retain our best candidates today to
be our leaders tomorrow.
International Development
Aerospace’s Naveed Deen has taken
the opportunities a Company this size
can offer. After joining Smiths Industries
in the UK from Rockwell 10 years ago,
he spent three years in Seattle
marketing products to Boeing before
returning to Cheltenham. Currently he is
back on the US West Coast, developing
our civil avionics business with Douglas
Aircraft at Long Beach. After 18 months
of working to meet the client’s needs, he
has been instrumental in winning
valuable orders, bringing production
work to both Cheltenham in the UK and
Malvern in the US.
Our inter-company MBA programme
with the Henley Management College
Acquiring the skills for success
Above: Catherine Lodge withChris Turnham from ShawSprunt, architects working onbehalf of the London Boroughof Lewisham.
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 20
21
rooms during critical care procedures.
During the year, Defence Systems
Cheltenham became the second of our
UK businesses to achieve ‘Investors in
People’ status, and a number of others
are approaching the level required for
accreditation. This tough standard set
by the UK Government demands a high
degree of commitment from the
Company, but is a valuable independent
assessment of our efforts. If similar
schemes were established interna-
tionally, Smiths Industries would be
among the first to subscribe to them.
These are only a few examples of
the values which form the culture of our
Company. As we continue to grow, we
aim to gain acceptance for those values
from each new employee or newly
joining business.
The objective is to make them feel
as much a part of our success-oriented
culture as those employees who have
contributed their expertise over a much
longer period.
now has a number of participants from
each of the three groups in the UK. In
1997 we will launch a parallel scheme
for US-based employees. In partnership
with Ford, British Telecom and Inter-
Continental Hotels we have tailored an
MBA programme which meets our
specific needs and will allow for study
transfer between the UK and US for
those employees who relocate as part
of their career development.
Industry Experience
There remains no substitute for
experience, and the deep industry
knowledge of our people is an in-
valuable base for our relationships
with customers. For example, clinicians
in the healthcare sector would expect
advice only from someone with
expertise that matches their own.
As regional sales trainer and repre-
sentative covering the St Louis area,
Tom Pelikan has the theoretical and
practical skills to show how the price/
performance of our single-use devices
can satisfy both administrators and
clinicians in a hospital, and often closes
a sale by demonstrating the best way of
using the products. He is a frequent
and well-accepted visitor to operating
Training and experience equip the people of Smiths Industries to differentiate ourservice through an intelligent appraisal ofcustomers’ needs
Above Right: Naveed Deen (right) with Keith Stockton,Senior Subcontract Negotiator with the McDonnellDouglas MD-95 Supplier Management Team.
Right: Tom Pelikan, with David Patient, RC-MISSpecialist, Respiratory Care Services, at the BarnesHospital, St. Louis, part of the BJC Network.
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 21
Turnover increased
by 12% to £1008m,
resulting from real
growth in the con-
tinuing businesses
and the first-time contributions of recent
acquisitions. Profit before tax and
exceptional items increased by 19% to
£165.4m with all three operating groups
contributing. Profits earned overseas
exceeded 50%, which highlights the
growing international spread of business
within the portfolio. We continued with
our policy of divesting non-core, under-
performing businesses and replacing
them with operations which will improve
the return to shareholders.
This year saw the Company’s total
sales exceed £1 billion for the first
time, indicating that our main markets
are beginning to turn in our favour.
Operating margins before interest and
exceptional items improved for the
seventh successive year to 16.7%, a
record level. Each operating group
improved its return in the year; in
particular Aerospace margins showed
a positive increase to 12% and we
expect further improvement as the
recovery in civil aviation feeds through to
profits and margins.
22 Financial Review
Financial Review
ALAN THOMSON
FINANCIAL DIRECTOR
Competitive pressures – especially in the
North American medical markets – have
been countered by a continued focus
on product innovation, reducing the
cost base and seeking further new
markets overseas.
The results of our overseas
operations are translated at average
exchange rates. The year-on-year effect
of different exchange rates on this year’s
results is immaterial, with sales
increasing by £7m, profits by £1m and
year end borrowings by £5m. We do
not hedge the effects of currency
movements on the translation of
overseas earnings.
Exceptional Items
During the year a dividend of £14.8m
was received from Ceewood Housing
Ltd, an unconsolidated subsidiary,
following the sale of its property
portfolio. Following the increase in the
Company’s interest in Japan Medico Co
Ltd to 50%, the opportunity has been
taken to review the basis of eliminating
the intercompany profit on stock held by
associated companies. All profit on
stocks held by associated companies is
eliminated, compared with the elimination
in earlier years of the profit proportionate
to the equity holding.
Acquisitions and disposals
The Company acquired four businesses
in the year at a cost of £104m. The new
businesses are Adaptaflex and Air
Movement Group in the Industrial
group, Level 1 in Medical and MJA
Dynamics in Aerospace. Towards the
end of the year our investment in Japan
Medico Co Ltd was increased to 50%.
This company remains an associate
as we control neither the board of
directors nor the management. In
accordance with the new Financial
Reporting Standard No 7, restructuring
costs have been charged against
operating profits.
The Company also disposed of its
interest in three companies: Aero Quality
Sales, SIMAC Ltd and Timeguard Ltd.
Operating profits/margins 1996 1995 1994 1993 1992
Sales £1,008m £899m £766m £701m £657m
Operating Profits £168m £141m £114m £100m £91m
Operating margins 16.7% 15.7% 14.9% 14.3% 13.8%
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 22
23
Total sales exceeded £1 billion for the first time, underlining how our mainmarkets are turning in our favour
Cash-Flow
Cash-flow from operations amounted
to £149m. We spent £41m on capital
projects – mainly organic growth
projects which promise attractive
financial returns. This continues our
policy of growing the capital base of our
existing operations as well as investing
in new businesses. We ended the
year with net borrowings of £28m,
representing a gearing ratio of 13%.
Over the past three years, the Company
has generated £220m of net cash to
fund acquisitions totalling £285m.
Free cash-flow – defined as cash-
flow before acquisitions and dividends
– amounted to £105m, covering the
dividend paid more than twice.
Shareholder Funds
Consolidated shareholders’ funds at
the end of the year were £860m before
deducting the goodwill reserve of
£648m. Although we enjoy a high return
on our net tangible assets, we evaluate
it on its total shareholder investment,
including goodwill, to ensure that it
earns more than its cost of capital.
Total return on this basis has now
reached 19.2%.
Financial Controls
Smiths Industries is a decentralised
organisation with day-to-day control
delegated to the management of indi-
vidual businesses. Managers are directly
responsible for the procedures and
controls in their operations without relying
on other parts of the organisation to
identify weaknesses and recommend
corrective action. Senior finance staff at
the centre and our internal and external
auditors perform in-depth reviews to
ensure that effective controls are in
place at all levels. Comprehensive
budgeting systems and regular forecast
updates are approved by the Board.
The procedures for review and approval
of major revenue and capital projects
enable us to monitor closely the
progress of those investments.
Individual financial executives report
directly to their own management but
also have direct reporting lines to the
Financial Director.
Financing and treasury
The Company monitors all foreign
exchange transactions from the
centre and permits no speculation in
currencies. US Dollar borrowings at year
end amounted to $159m and largely
Cash-Flow 1996 1995£m £m
Profit before exceptional items 165 138
Depreciation 31 29
196 167
Capital Expenditure (41) (36)
Asset sale proceeds 9 9
Working Capital (15) –
Cash-Flow from Operations 149 140
Tax (50) (36)
Dividends (45) (40)
New Shares 5 5
59 69
Exceptional Item 15 –
Acquisitions (net of disposals) (98) (52)
Exchange rates (5) 4
Decrease/increase in cash (29) 21
Return on Shareholder investment 1992-1996
Ratio of pre-tax profit to shareholder investment
£m
800
600
400
200
092 93 94 95 96
16.1% 15.7% 15.9% 17.6% 19.2%
%
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 23
24 Financial Review
matched dollar net assets. All substantial
foreign currency commitments are
covered forward. Other than for a US
private placing the Company has not given
guarantees of subsidiaries’ borrowings.
Research and development
The Company maintained its policy of
investing significant sums in developing
products that will underpin future
growth. The £107m cost of research
and development projects in the year
includes £50m funded by the Company.
We continued our prudent policy of
writing off against profit the costs
incurred during the year.
Pensions
We operate a number of pension
schemes in the UK and US. Our
triennial evaluation of the UK schemes
in 1995 showed that the current surplus
of assets over future liabilities would
enable the Company’s contribution
holiday towards the main UK scheme
to continue into the next decade.
The UK surplus is analysed in
accordance with current accounting
practice, with the surplus amortised
over the estimated remaining working
life of the employees.
Audit
With our rising international profile
and more than half of the Company’s
profits now generated outside the UK,
the Board is seeking the approval of
shareholders to move to a firm of
auditors with world-wide capability.
This is increasingly necessary to
ensure that a single firm audits our
operations on a consistent basis. We
also rely heavily on our auditors to assist
with our investigations associated with
acquisitions in the UK and overseas.
Accordingly it is the Board’s intention that
for 1996/97 Price Waterhouse acts
jointly as auditors with Clark Whitehill –
a firm which has served us well since
1922 – with Price Waterhouse alone
taking responsibility for the worldwide
audit from 1997/98.
This year we have also set up our
own fully staffed internal audit depart-
ment. Located in the UK and overseas, it
will perform ongoing operational reviews
to ensure that all businesses are
reviewed on a regular basis.
Shareholder Value
In December 1995 the Company entered
the FT-SE 100, reflecting the increase in
market value of the Company’s shares.
Our investment for future growth, healthy
cash-flows, and progressive dividend
policy is a combination that should
continue to create substantial share-
holder value. On a five-year basis,
shareholder value – defined by share
price appreciation plus gross dividends
re-invested – has increased at a
compound rate of 28% per annum,
compared with a rise of 13% in the All-
Share index and 18% in the Engineering
Sector index.
Shareholder Value£m
400
300
200
100
092 93 94 95 96
Financial Review continued
334
227
187
Smiths IndustriesEngineering SectorFT-SE All Share
1991 = 100
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 24
Principal Activities
The principal activities of the Company
and its subsidiaries are the development,
manufacture and sale of avionics for
commercial aircraft and military require-
ments; marine and fighting vehicle
systems; single-use disposable medical
products for critical care applications;
medical infusion pumps; operating tables
and related equipment; ducting and
ventilation systems; and a varied range
of products for consumer, industrial
and engineering applications. The main
manufacturing operations are in the UK
and USA.
Results and dividends
The results for the 52 weeks ended
3 August 1996 are set out in the
Consolidated Profit and Loss Account on
page 34. Sales for the year amounted to
£1,008.4m, against £899.3m last year.
The profit for the year after taxation
amounted to £117.8m (1995 £93.9m).
An interim dividend of 5.6p per
ordinary share of 25p was paid on 7 June
1996. The directors recommend for pay-
ment on 8 January 1997 a final dividend
on each ordinary share of 10.6p, making
a total dividend of 16.2p for the year.
The retained profit of £68.7m was
transferred to Reserves.
Research and development
£107m was spent on research and
development during the year, of which
£50m was funded by the Company
and the balance by customers. Each
business carries out research and
development programmes to suit its
own particular market and product
needs. Interchange of technology
and technical information between
businesses in the manufacturing sector
is centrally co-ordinated.
Changes in Company interests
during the year
On 17 October 1995, the Company
acquired the issued share capital of
Level 1 Technologies, Inc. for a cash
consideration of US$57m.
On 21 December 1995, the Company
acquired the issued share capital of M.J.A.
Dynamics Limited for a consideration of
£4.9m, of which £2.6m was met by the
issue of loan notes and £1.8m is deferred.
On 22 March 1996, the Company
sold the business and assets of SIMAC
Limited for a consideration of £0.8m.
On 1 April 1996, the Company sold
its Aero Quality Sales businesses for
US$4.7m.
On 19 April 1996, the Company
acquired over 90% of the issued ordinary
and ‘A’ non-voting share capital of Air
Movement (Holdings) Limited and made
an unconditional offer for the balance
of the shares. The offer was accepted
by all the remaining shareholders. The
initial consideration for the acquisition
was £40.6m, of which £8.4m was paid in
cash, £23m by way of variable rate
unsecured loan notes, and £9.2m
borrowings assumed on acquisition. An
additional payment not exceeding £6m
may be made if the net tangible assets
of Air Movement (Holdings) Limited on
31 March 1996 exceeded £13.125m.
On 19 April 1996, the Company
acquired all the issued share capital
of Adaptaflex Limited for a cash
consideration of £21m.
On 28 June 1996, the Company
sold the business and assets of the
Timeguard business for a cash con-
sideration of £1.9m.
Future developments
The Company will pursue its existing
international activities and continue to
seek business opportunities in both the
UK and overseas.
Interests in land
Land and buildings were professionally
revalued as at 30 July 1994. At 3 August
1996 the value of land and buildings
is estimated to exceed book value by
around £15m. This valuation has not
been reflected in these accounts.
Charitable and political donations
During the year the Company made
donations of £767,000 for charitable
purposes including a payment of
£243,000 for the Portex Chair of
Paediatric Anaesthesia. No political
donations were made.
Directors
The names of those who were directors
at the end of the financial year are listed
on page 6. Mr R. Williams retired from
Directors’ Report 25
Directors’ Report
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 25
the Board on 22 February 1996. Mr E.
Lindh and Mr K. O. Butler-Wheelhouse
were appointed to the Board, as
executive directors, on 13 February
1996 and 1 August 1996, respectively.
Re-appointment of directors
In accordance with Article 73, follow-
ing their appointments during the year,
Mr E. Lindh and Mr K. O. Butler-
Wheelhouse will retire as directors at the
Annual General Meeting on 19 November
1996 and will seek re-appointment.
Sir Roger Hurn and Mr N.V. Barber
will both retire by rotation, in accordance
with Article 74, and will seek re-appoint-
ment at the Annual General Meeting.
Sir Alex Jarratt will retire at the
Annual General Meeting and will not
seek re-appointment.
Directors’ service contracts
Sir Roger Hurn has a service contract
which is subject to three months’
notice expiring on or after 24 November
1998. Mr N. V. Barber, Mr K. O. Butler-
Wheelhouse, Mr G. M. Kennedy, Mr E.
Lindh and Mr A. M. Thomson have
service contracts with the Company
which are subject to termination by two
years’ notice, given to expire at any time.
With the exceptions referred to
above, no director had a beneficial
interest in any contract to which the
Company or its subsidiaries was a party
during the year.
Interests in shares
As at 15 October 1996 the Company had
been notified, pursuant to the Companies
Act 1985, of the following material
interests in its issued share capital:
No. of shares Percentage of*issued*
share capital*
Prudential Corporation group of companies 9,856,031 3.24
Norwich Union group of companies 12,101,317 3.98
*percentage of share capital in issue on 15 October 1996
The Company has not acquired
or disposed of any interests in its
own shares.
The interests of the directors, their
families and any connected persons in
the issued share capital of the Company
and details of their share options are
shown on page 41.
Corporate Governance
The Company subscribes to the
recommendations of the Cadbury
Committee on financial aspects of
corporate governance and complies
with the Code of Best Practice
published on 1 December 1992.
The Board of Directors normally
meets formally seven times a year to
make and review major business
decisions and monitor current trading
against budgets which it has approved.
It additionally exercises control by
determining matters specifically reserved
for it in a formal schedule which only
the Board may change: those matters
include the acquisition of companies
and major capital expenditure. Once a
year the Board meets in informal
conference to consider long-term
strategy and industrial developments
affecting the Company. Additional meet-
ings are arranged to deal with urgent
developments.
Sir Roger Hurn is both Chairman and
Chief Executive of a Board with
exceptionally strong non-executives. After
the Annual General Meeting Sir Roger
Hurn will relinquish his role as Chief
Executive but will continue as Chairman.
Mr K. O. Butler-Wheelhouse will be
appointed Chief Executive in his place.
There is an agreed procedure for
all directors to take independent
professional advice at the Company’s
expense in connection with their duties.
They also have access to the advice and
services of the Company Secretary,
whose appointment is in accordance
with the Code.
The terms of appointment of the
executive directors and their remuner-
ation are determined by the Stand-
ing Committee described below. The
directors have two year rolling contracts.
All directors are subject to retirement by
rotation; any director who attains the age
of 70 is subject to annual re-election.
The formal process of appointing
non-executive directors involves selection
by the Board and confirmation by the
shareholders; initial appointments are
for three years. Non-executive directors
do not participate in bonus, share
option or pension schemes.
The Standing Committee on Senior
Appointments and Remuneration which
meets at least three times a year, consists
26 Directors’ Report
Directors’ Report continued
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 26
of all the non-executive directors. After Sir
Alex Jarratt’s retirement it will be chaired
by Mr K. Orrell-Jones. Sir Roger Hurn and
Mr K. O. Butler-Wheelhouse will attend
meetings of the Committee by invitation,
but will not participate in discussions of
their own interests. The Committee
monitors the performance of the chief
executive and other directors and has
access to all information required for that
purpose. The report of the Committee
on executive remuneration is set out in
pages 31 to 32.
The Audit Committee’s terms of
reference accord with the Cadbury
recommendations. The Committee con-
sists of all the non-executive directors
and meets at least twice a year, with the
chief executive, financial director and
auditors normally attending meetings.
The Chairman is Sir Peter Thompson; he
and his committee also meet the auditors
in the absence of executive directors.
Internal Control. The Board accepts
its responsibility for maintaining the
effective system of internal control which
includes not only internal financial
control but also compliance with
relevant laws and regulations. Any
system of internal control can provide
only reasonable, not absolute,
assurance against material loss to the
Company or material misstatements in
the financial accounts.
In the highly regulated environment
of the aerospace and medical
industries, procedures are codified in
detailed operating procedures manuals
and are reinforced by regular educational
programmes. This is designed to ensure
not only compliance with regulatory
requirements but also with the general
principles of business integrity.
A key element in any system is
communication and a number of
committees exist which enable the
executive directors and senior corporate
staff to address financial, human
resource, risk management and other
issues. Risk management surveys seek to
limit the incidence of injuries to employees
and prevent environmental damage.
Experience is shared by subsidiaries
through company wide seminars.
During the year the Company has
created an Internal Audit Department.
The Director of Internal Audit reports to
the Chairman of the Audit Committee.
The Internal Audit Department is
charged with reporting upon the
Company’s internal control processes.
The internal financial control systems
includes the following key features,
which have been designed and
established over a number of years
to provide internal financial control
appropriate to the Company’s businesses:
• The approval of comprehensive
budgets by the Board and the monthly
monitoring of performance against
budget referred to above;
• A detailed investment approval process
requires Board approval of all major
capital projects;
• The Audit Committee’s consideration
of any significant control matters;
• Appointment of experienced and
professional staff both by recruitment
and promotion.
The Audit Committee has reviewed
the effectiveness of the Company’s
system of internal financial control. In
addition to consideration of reports from
the Director of Internal Audit and from
the Company’s external auditors, the
Committee has reviewed the results of
an internal self-assessment exercise
which required the heads of all the
business units of each operating group
to report through their operating groups
to the Chairman and Chief Executive.
Going concern. The Board’s review
of the accounts, budgets and forward
plans, together with the internal control
system, lead the directors to believe that
the Company has ample resources to
continue in operation for the foreseeable
future. The accounts are therefore
prepared on a going concern basis.
Auditors. The auditors have
confirmed that, in their opinion: with
respect to the above statements on
internal financial control and going
concern, the directors have provided
the disclosures required by the Code as
supplemented by the related guidance
for directors and such statements are
not inconsistent with the information of
which they are aware from their audit
work on the accounts; and that the
other statements on page 26 and
this page appropriately reflect the
Company’s compliance with the
paragraphs of the Code dealing with
27
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 27
other matters which are specified for
their review. The Code does not require
the auditors to perform the additional
work necessary to express an opinion
on the effectiveness of either the
Company’s system of internal financial
control or its corporate governance
procedures nor on the ability of the
Company to continue as a going
concern.
Policy on payment of creditors
The Company’s policy is to pay creditors
promptly in accordance with agreed
terms of business.
Environment
The Company seeks to ensure that
its operations and products cause
the minimum reasonably achievable
detriment to the environment. Care is
taken to avoid discharges of environ-
mentally harmful substances and to
dispose of waste in a safe and approved
manner. Contingency arrangements and
plans exist to reduce the risk of and limit
the effect of any accidental spillage.
Where sites occupied by the Company
have been found to be contaminated by
past industrial practices, programmed
clearance has been undertaken in
co-operation with the appropriate
regulatory authorities.
Personnel policies
It is the Company’s policy to provide
equal opportunities for employment and
to give the fullest consideration to
employment prospects for the disabled.
The Company continues to be actively
involved in all aspects of the training
and development of young persons,
including government sponsored schemes
and unit initiatives designed to ease the
transition from school to work.
Share option schemes enable
employees to participate financially in
the affairs of the Company.
Employees are regularly provided with
a wide range of information concerning
the performance and prospects of the
business in which they are involved by
means of Employee Councils and other
similar consultative bodies which allow
the views and opinions of personnel to be
taken into account.
All matters concerning the environ-
ment, health and safety continue to be
regulated by preventative, investigatory
and consultative systems; issues
relevant to the Company pension
scheme are likewise covered by means
of structured committees, including
negotiation with representatives of
recognised trade unions.
Authority to issue shares
At the Annual General Meeting share-
holders will be asked to revise the
authority, given to the directors at the
Annual General Meeting in November
1995, to allot shares for the purposes of
section 80 of the Companies Act 1985
so as to reflect the increase in the
Company’s issued share capital since
the last Annual General Meeting. The
authority proposed will expire on the
fifth anniversary of the Meeting, unless
otherwise renewed. The ordinary
resolution is set out in the Notice
of AGM.
Also in the Notice is the special
resolution to renew the power granted
to directors under section 95 of the
Companies Act 1985. The new authority
sought will be on substantially similar
terms to those attaching to the existing
authority and will permit the directors to
allot equity securities:
• in connection with a rights issue pro
rata to the rights of the existing
shareholders;
• pursuant to the terms of any share
scheme approved by the shareholders
in General Meeting; and
• for any other purpose provided that
the aggregate value of such allotments
does not exceed £3,794,960 (approx-
imately 5% of the issued share capital).
Authority to purchase shares
At the Annual General Meeting the
Company will seek to renew the auth-
ority, granted in general meeting on
28 November 1995, to make market
purchases of its shares, as defined in
section 163 of the Companies Act 1985.
The authority will be limited to not more
than 5% of the issued share capital and
will be renewed annually. The maximum
price that may be paid under the authority
will be limited to 105% of the average of
the middle market quotations of the
Company’s shares, as derived from the
28 Directors’ Report
Directors’ Report continued
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 28
1995, the directors give notice to
shareholders that on 15 October 1996
the directors passed a resolution that
title to ordinary shares of 25p each in the
capital of the Company, in issue or to be
issued, may be transferred by means of
CREST or any other relevant system, as
defined. The resolution will become
effective immediately prior to CRESTCo
Limited granting permission for the
shares to be transferred by way of the
CREST system.
This resolution will permit the
dematerialisation of the Company’s
ordinary shares so that they may be
traded through CREST, the new,
paperless settlement system for UK
traded shares and other securities. The
resolution also has the effect of
disapplying such of the provisions of the
Company’s Articles of Association as are
inconsistent with the holding and transfer
of the Company’s ordinary shares in
CREST and any provisions of the
Uncertificated Securities Regulations
1995, as and when the shares concerned
enter the CREST system.
The Company has provisionally
agreed with CRESTCo, the operator of
the system, that shares may be traded
in uncertificated form from 17 March
1997 – the Company’s “C Date”. Share-
holders who wish neither to become
members of CREST nor to transfer their
holdings into nominee companies may
continue to hold their shares and deal
in them in certificated form. Further
information on the opportunities
presented by and the effects of
dematerialising shares can be obtained
from CRESTCo Limited, Trinity Tower,
9 Thomas Moore Street, London E1 9YN.
By Order of the Board
Alan Smith
Secretary
15 October 1996
London NW11 8DS
29
London Stock Exchange Daily Official
List, for the ten business days prior to
any purchase.
The directors will only exercise the
authority if they are satisfied that any
purchase will increase the earnings
per share of the ordinary share capital
in issue and will be in the interests of
the shareholders.
Auditors
In view of the Company’s increasing
size and international presence the
directors feel that it would be in the
best interests of the Company to appoint
an auditor with a world-wide organisation.
In order to ensure a smooth hand over, it
is proposed that Price Waterhouse be
appointed as joint-auditor along with
Clark Whitehill for 1996/97.
Thereafter, Price Waterhouse would
become sole auditor. Resolutions will be
proposed at the Annual General Meeting
to appoint Clark Whitehill and Price
Waterhouse as joint-auditors and to
authorise the directors to determine the
auditors’ remuneration.
Personal Equity Plans
The Company has introduced a
Corporate PEP and a single company
PEP, which are managed by Henderson
Investment Services (Helpline tel:
0171 542 1357).
Dematerialisation of shares
In accordance with the requirements of
the Uncertificated Securities Regulations
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 29
To the Shareholders of Smiths
Industries plc
We have audited the accounts on pages
33 to 49 which have been prepared
under the accounting policies set out
on page 33.
Respective responsibilities of directors
and auditors
As described above, the Company’s
directors are responsible for the preparation
of accounts. It is our responsibility to
form an independent opinion, based on
our audit, on those accounts and to
report our opinion to you.
Basis of opinion
We conducted our audit in accordance
with Auditing Standards issued by the
Auditing Practices Board. An audit
includes examination, on a test basis, of
evidence relevant to the amounts and
disclosures in the accounts. It also
includes an assessment of the signifi-
cant estimates and judgements made
by the directors in the preparation of
the accounts, and of whether the
accounting policies are appropriate to
the Company’s circumstances, consis-
tently applied and adequately disclosed.
We planned and performed our
audit so as to obtain all the information
and explanations which we considered
necessary in order to provide us with
sufficient evidence to give reasonable
assurance that the accounts are free
from material mis-statement, whether
caused by fraud or other irregularity or
error. In forming our opinion we also
evaluated the overall adequacy of
the presentation of information in
the accounts.
Opinion
In our opinion the accounts give a true
and fair view of the state of affairs of the
Company and the group as at 3 August
1996 and of the profit of the group for
the 52 weeks then ended and have
been properly prepared in accordance
with the Companies Act 1985.
Clark Whitehill
Chartered Accountants and
Registered Auditor
London
15 October 1996
Auditors’ Report
Company law requires the directors to
prepare accounts for each financial year
which give a true and fair view of the
state of affairs of the Company and the
group at the end of the year, and of
the profit or loss of the group for that
period. In preparing those accounts, the
directors are required to
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that
are reasonable and prudent;
• state whether applicable accounting
standards have been followed, subject
to any material departures disclosed
and explained in the accounts;
• prepare the accounts on the going
concern basis unless it is inapprop-
riate to assume that the Company will
continue in business.
The directors are responsible for
keeping proper accounting records
which disclose with reasonable accuracy
at any time the financial position of the
Company and enable them to ensure
that the accounts comply with the
Companies Act 1985. They are also
responsible for safe-guarding the assets
of the Company and hence for taking
reasonable steps for the prevention of
fraud and other irregularities.
30 Smiths Industries
Statement of Directors’ Responsibilities
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 30
31
Directors’ Emoluments and Interests
Report of the Standing Committee on
Senior Appointments & Remuneration
The Standing Committee of the Board
referred to on page 26 determines the
remuneration of executive directors
including their annual bonus targets
and share options. Its constitution and
operation comply with Section A of
the best practice provisions annexed
to the Listing Rules of the London Stock
Exchange.
The Standing Committee seeks to
maintain a competitive programme
which enables the Company to attract
and retain the highest calibre of
executive. The Committee consults with
the Chief Executive and seeks advice
from external remuneration consultants
on a regular basis and has access to
surveys published by those consultants
which enable wide ranging comparisons
to be made. In framing its remuneration
policy the Committee has given full
consideration to Section B of the best
practice provisions annexed to the
Listing Rules. The Committee considered
whether there should be a further
reduction in contract terms for executive
directors and confirmed its view that
one year rolling contracts give the
Company less assurance of continuity
than is desirable. It accepts and
endorses the principle of mitigation of
damages on termination of a contract.
Salaries are reviewed annually. The
Committee takes into account individual
performance and experience, the size
and nature of the job, the relative
performance of the Company pay policy
within the Company and the salary
available in comparable engineering
companies. Benefits include a company
car, pension, health insurance and,
where appropriate, relocation expenses,
generally in line with benefits available
for executives in similar positions in
other engineering companies.
Bonuses are based on successful
performance and are only paid on the
achievement or over achievement of a
carefully considered annual business
plan which has been approved by the
whole Board. All bonuses are capped.
Under a deferred share scheme,
established in 1992, senior executives
may use their after-tax bonus to buy the
Company’s shares at the prevailing
market price; if they retain those shares
for three years they may exercise
options over a matching number of
shares for a nominal sum. Income tax is
payable on the market value of the
matching shares when the option is
exercised. In December 1995 executive
directors participated in the scheme in
respect of their 1995 bonus and were
granted options over shares to the
values listed in a table on page 40.
The total remuneration of directors is
listed in a table on page 40.
The annual bonus and any gains
under share option schemes are not
pensionable. Company car benefits
which are subject to income tax
and for which a cash alternative is
available are pensionable. This is
consistent with general practice.
Subject to Revenue limits a final
salary scheme provides a pension of up
to two thirds of final salary (including
pensionable benefits). Where Revenue
limits apply the difference between the
pension payable on the cap and that
payable on two thirds of final salary is,
after taking into account any pension
transfers, made good by the Company
from its own resources. Details of
pension provisions are set out in a table
on page 41.
Non-executive directors were paid
fees of £100,000 in the year to 31 July
1996; they have no service contracts
and are not eligible for bonuses or
participation in share schemes and
no pension contributions are made on
their behalf.
The remuneration of non-executive
directors is determined by the Board
within the limits set out in the articles
of association.
Directors’ interests in the
Company’s shares
The interests of directors in the issued
share capital of the Company are set
out in a table on page 41.
The executive share option scheme
approved at the Annual General Meeting
last year covers approximately 137
executives. Awards are approved by the
Standing Committee. In awarding share
options the Standing Committee has
regard to guidelines published by
investor protection committees, the
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 31
32 Smiths Industries
Directors’ Emoluments and Interests continued
individual performance of participants
and any evidence that the scheme
has encouraged option holders to
become shareholders. Options may only
be exercised after three years if there
has been a sustained and significant
improvement in the financial performance
of the Company and a performance
requirement has been met: initially that
requirement is that the increase in the
total shareholder return of the Company,
over a period of three years from the
date of grant, must exceed the average
increase in total shareholder return
achieved by the companies comprising
the Engineering Sector of the FT-SE
Actuaries Index over the same period.
The Save-as-you-Earn scheme
which is open to all UK employees with
12 months’ service is subject to UK
legislation as to the amount which can
be saved. Participants save a fixed sum
per month for five years and may use
the sum generated by their savings
contracts to exercise the options which
are usually granted at a 20% discount to
the market price at the start of the five
year period.
In the 52 weeks to 3 August 1996,
executive directors exercised share
options and at 3 August 1996 held
unexercised options as described in a
table on page 41.
There were no changes in the
options held by directors between
3 August 1996 and 15 October 1996.
The Register of Directors’ Interests
(which is open to inspection) contains
full details of directors’ shareholdings
and options to subscribe for shares in
the Company.
Subject to the overriding require-
ment of the Company the Committee is
prepared to allow executive directors to
accept external appointments where it
considers that such appointments will
contribute to the director’s breadth of
knowledge and experience. Directors
are permitted to retain fees associated
with such appointments.
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 32
Accounting convention
The accounts have been prepared in
accordance with all applicable financial
reporting and accounting standards
under the historical cost convention
modified to include the revaluation of
certain properties.
Company profit and loss account
In accordance with the concession
granted under section 230(3) of the
Companies Act 1985 the profit and
loss account of Smiths Industries plc
has not been separately presented in
these accounts.
Basis of consolidation
Goodwill arising on consolidation and
representing the difference between the
cost of acquisition of a subsidiary
undertaking and the fair value of its net
assets at the date of acquisition is
transferred to a separate reserve in the
year of acquisition.
Results of subsidiaries acquired
during the year are consolidated from
the date of acquisition. The Company’s
interest in Ceewood Housing Ltd has
been excluded from the consolidation on
the grounds that it has sold its assets, has
paid an interim dividend and is in the
process of making a final distribution.
Full provision is made for the
unrealised profit on stock held by
associated companies (see Note 6).
Turnover
Turnover represents the invoiced
amount of goods sold and services
provided during the year, after the
deduction of trade discounts and sales
related taxes, and the value of work
undertaken during the year on long-
term contracts.
Research and development
Expenditure, other than that recoverable
from third parties, is written off in the
year in which it is incurred.
Fixed assets
Depreciation is provided at rates
estimated to write off the relevant assets
by equal annual amounts over their
expected useful lives. In general, the
rates used are: Freehold and long
leasehold buildings – 2%, Short lease-
hold property – over the period of the
lease, Plant, machinery etc. – 10% to
20%, Motor vehicles – 25%, Tools and
other equipment – 10% to 33%.
Fixed assets under finance leases are
capitalised and depreciated in accordance
with the Company’s depreciation policy.
The capital element of future lease
payments is included in creditors.
Stocks
Stocks and work in progress are valued
at cost, including related production
overheads, reduced to estimated net
realisable value where appropriate.
Profit is taken on long-term contracts
by reference to the work completed.
Provision for losses is made as soon as
they are recognised.
Foreign currencies
Assets and liabilities in foreign currencies
are translated into sterling at market
rates ruling at the balance sheet
date. The profit and loss accounts of
overseas subsidiaries are translated at
average rates of exchange for the year.
Exchange adjustments arising from the
retranslation of opening net assets in
overseas subsidiaries are dealt with
through reserves.
Taxation
Provision for deferred taxation liabilities
is made to the extent that it is
considered that such liabilities will arise
in the future. Account is taken of all
short-term timing differences and all
timing differences relating to post
retirement benefits.
Post retirement benefits
The cost of providing pensions and post
retirement healthcare for employees is
charged in the profit and loss account
over the working life of the employees
taking into account the recom-
mendation of qualified actuaries. Any
funding surpluses or deficits that arise
are amortised over the average working
life of employees.
33
Accounting Policies
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 33
Ordinary Exceptional 52 Weeks ended 53 Weeks endedActivities Items 3 August 1996 5 August 1995
Note £m £m £m £m
TurnoverContinuing operations 964.2 964.2 879.3Acquisitions 31.4 31.4Disposals 12.8 12.8 20.0
1 & 2 1,008.4 1,008.4 899.3
Cost of sales 3 & 6 (591.3) (9.1) (600.4) (550.6)
Gross profit 417.1 (9.1) 408.0 348.7Operating expenses 4 (251.5) (251.5) (209.6)
Operating profitContinuing operations 161.0 (9.1) 151.9 138.9Acquisitions 4.2 4.2Disposals 0.4 0.4 0.2
5 165.6 (9.1) 156.5 139.1Share of profits of associated companies 2.5 2.5 1.8
Operating profit including associated companies 168.1 (9.1) 159.0 140.9Distribution from Ceewood Housing Ltd after expenses 6 14.2 14.2Profit on sale of properties 6 0.3 0.3 3.0Loss on sale of businesses 6 (0.4) (0.4) (3.5)
Profit before interest 168.1 5.0 173.1 140.4Net interest 7 (2.7) (2.7) (2.4)
Profit before taxation 165.4 5.0 170.4 138.0Tax on profit 8 (54.6) 2.0 (52.6) (44.1)
Profit for the financial year 110.8 7.0 117.8 93.9Dividends 9 (49.1) (49.1) (43.4)
Retained profit for the year 61.7 7.0 68.7 50.5
Earnings per share 10 36.6p 38.9p 31.3p
Statement of Total Recognised Gains and Losses
£m £m
Profit for the financial year 117.8 93.9Exchange adjustments 0.6 1.7
118.4 95.6
Notes on pages 37 to 49 form part of these accounts.
Consolidated Profit and Loss Account
34 Smiths Industries
SI/1 Accounts vAW colour5 3/3/97 5:33 pm Page 34
Consolidated Company
3 August 1996 5 August 1995 3 August 1996 5 August 1995Note £m £m £m £m
Fixed assetsTangible assets 14 185.3 166.7 44.5 42.7Investments and advances 16 5.3 4.6 496.9 461.8
190.6 171.3 541.4 504.5Current assetsStocks 17 150.7 136.2 32.5 29.4Debtors 18 248.7 227.0 81.8 95.1Cash at bank and on deposit 120.4 102.3 95.9 65.0
519.8 465.5 210.2 189.5
Creditors: amounts falling due within one year 19 (345.3) (276.3) (151.9) (118.5)
Net current assets 174.5 189.2 58.3 71.0
Total assets less current liabilities 365.1 360.5 599.7 575.5Creditors: amounts falling due after more than one year 19 (119.2) (91.8) (25.4) (6.0)Provisions for liabilities and charges 20 (34.1) (43.2) (8.2) (17.5)
Net assets 211.8 225.5 566.1 552.0
Capital and reservesCalled up share capital 22 75.9 75.4 75.9 75.4Share premium account 23 29.6 24.2 29.6 24.2Revaluation reserve 23 3.3 3.8 0.6 0.6Other reserves 23 220.9 220.2 182.5 182.3Profit and loss account 23 530.3 461.2 277.5 269.5Goodwill reserve 23 (648.2) (559.3) – –
Shareholders’ funds 24 211.8 225.5 566.1 552.0
The accounts on pages 33 to 49 were approved by the board of directors on 15 October 1996 and were signed on its behalf by:
Sir Roger Hurn Alan M Thomson
Balance Sheets
35
SI/1 Accounts vAW colour5 3/3/97 5:33 pm Page 35
52 weeks ended 53 weeks ended 3 August 1996 5 August 1995
Note £m £m
Net cash inflow from operating activities (see below) 183.3 168.8
Returns on investment and servicing of finance:Interest received 7.2 6.5Interest paid (9.5) (8.2)Distribution received from Ceewood Housing Limited 14.8 .–Dividends paid (45.2) (40.3)
Net cash outflow from returns on investment and servicing of finance (32.7) (42.0)
Tax paid (50.3) (36.2)
Investing activities:Purchase of fixed assets (40.7) (36.0)Sales of fixed assets 8.7 8.5Acquisition of subsidiary companies (net of £5.4m from disposals) 26 (98.3) (51.6)Net decrease in deposits 27 20.0 25.0
Net cash outflow from investing activities (110.3) (54.1)
Net cash outflow – 1995 inflow – before financing (10.0) 36.5Financing:Share issues 27 5.9 5.7Net increase – 1995 decrease – in borrowings 27 42.2 (5.2)
Net cash inflow from financing 48.1 0.5
Increase in cash and cash equivalents 27 38.1 37.0
Reconciliation of operating profit to net cash inflow from operating activitiesOperating profit 168.1 140.9Depreciation 30.5 28.7Increase – 1995 decrease – in stocks (4.7) 5.2Increase in debtors (2.3) (8.1)Decrease – 1995 increase – in creditors (8.3) 2.1
183.3 168.8
Notes on pages 37 to 49 form part of these accounts.
Cash-Flow Statement
36 Smiths Industries
SI/1 Accounts vAW colour5 3/3/97 5:33 pm Page 36
Turnover Profit Assets
1996 1995 1996 1995 1996 19951 Analyses of turnover, profit and assets £m £m £m £m £m £m
MarketAerospace 377.1 374.2 45.3 40.3 63.5 68.1Medical Systems 303.3 275.4 73.1 63.0 83.4 78.1Industrial 328.0 249.7 49.7 37.6 93.2 78.5
1,008.4 899.3 168.1 140.9 240.1 224.7Net interest/net borrowings (1995 net cash ) (2.7) (2.4) (28.3) 0.8
165.4 138.5 211.8 225.5Exceptional items 5.0 (0.5)
Profit before tax 170.4 138.0
GeographicalUnited Kingdom 451.0 421.6 75.1 71.5 105.1 119.9USA 466.5 440.1 71.4 56.9 103.0 70.9US dollars $723.1m $695.4m $110.7m $89.9m $158.6m $114.1mEurope 140.5 89.7 17.2 9.2 29.8 32.1Other overseas 12.8 11.5 4.4 3.3 2.2 1.8Inter-company (62.4) (63.6)
1,008.4 899.3 168.1 140.9 240.1 224.7
1996 1995 2 Analysis of turnover by destination £m £m
United Kingdom 256.3 232.5USA 429.9 420.9Europe 213.3 149.6Other overseas 108.9 96.3
1,008.4 899.3
3 Cost of sales
Cost of sales of £591.3m includes £16.0m in respect of acquisitions made during the year and £9.8m (1995 £15.5m) in respect of disposals.
1996 1995 4 Operating expenses £m £m
Continuing operationsDistribution costs 110.2 98.9Administrative expenses 127.5 106.4
237.7 205.3
AcquisitionsDistribution costs 4.5Administrative expenses 6.7
11.2
DisposalsDistribution costs 1.7 2.8Administrative expenses 0.9 1.5
2.6 4.3
Total operating expenses 251.5 209.6
Notes to the Accounts
37
SI/1 Accounts vAW colour5 3/3/97 5:33 pm Page 37
1996 1995 5 Operating profit is after charging – £m £m
Depreciation of fixed assets 30.5 28.7Operating leases – Land and buildings 6.1 5.0
– Others 1.9 1.8Auditors – Audit fees 1.4 1.3
– Other fees 0.1 0.1Restructuring and redundancy costs 4.6 2.3Research and development expenditure 50.0 49.2
1996 19956 Exceptional items £m £m
Unrealised profit elimination relating to associated company (9.1) .–Distribution from Ceewood Housing Ltd after expenses 14.2 .–Profit on sale of properties 0.3 3.0Loss on sale of businesses (0.4) (3.5)
Exceptional items before tax 5.0 (0.5)
Tax relief on unrealised profit elimination relating to associated company (1995 sale of business) 2.0 2.3
Exceptional items after tax 7.0 1.8
Following the increase in the Company’s interest in Japan Medico Co Ltd to 50%, the opportunity has been taken to review the basis ofeliminating the intercompany profit on stock held by associated companies. It has been decided to adopt the more prudent approach ofeliminating all such profit and as a result £9.1m has been charged as an exceptional item in arriving at the cost of sales.
Loss on sale of businesses comprises assets sold £5.3m and goodwill written off £0.5m, less proceeds of sale £5.4m.
1996 1995 7 Net interest £m £m
Receivable 6.6 6.3Payable:
Bank loans and overdrafts repayable within 5 years (3.8) (3.5)Other loans repayable within 5 years (0.7) .–11.25% Debenture stock 1995/2000 – (0.5)Other loans repayable in more than 5 years (4.8) (4.7)
(2.7) (2.4)
1996 1995 8 Taxation £m £m
Taxation on the profit for the year:UK corporation tax at 33% 38.9 27.0Deferred taxation (1.3) 3.9Overseas taxation 16.4 15.3Double taxation relief (0.7) (0.7)Exceptional items (2.0) (2.3)Associated companies 1.3 0.9
52.6 44.1
Notes to the Accounts continued
38 Smiths Industries
SI/1 Accounts vAW colour5 3/3/97 5:33 pm Page 38
1996 1995 9 Dividends £m £m
Ordinary interim paid 5.6p per share (1995 5.05p) 16.9 15.2Ordinary final proposed 10.6p per share (1995 9.35p) 32.2 28.2
49.1 43.4
10 Earnings per share
Separate figures are given for earnings per share related to the average number of shares in issue of 302,386,924 (1995 300,036,882), in respect of:
(i) Profits after taxation of £110.8m (1995 £92.1m) arising from ordinary activities(ii) Total net profits after exceptional items and taxation of £117.8m (1995 £93.9m)
11 Post-Retirement benefits
Smiths Industries operates a number of pension schemes throughout the world. The major schemes are of the defined benefit type withassets held in separate trust administered accounts.
Contributions to pension schemes are made on the advice of independent qualified actuaries, using, in the United Kingdom, the ProjectedUnit method and in the USA a type of Aggregate Method. The aim is for the benefits to be fully funded during the scheme members’working lives. In both countries the regular pension cost is assessed under the Projected Unit method. The latest actuarial assessmentswere as at 31 March 1995 for the UK and 31 July 1996 overseas. The most significant assumptions were:-
Investment Return 9% per annum
Salary Inflation 7% per annum
Dividend Growth 4.5% per annum
Pension Increases 4.5% per annum
The variation from regular cost, which recognises the excess of assets over liabilities in the pension schemes, including that existing at the timeof initially adopting the present accounting policy, has been spread over approximately 10 years, being the average remaining working life.
The Company’s defined benefit schemes had assets with a market value of £515m. The actuarial value of the scheme assets represented111% of the liabilities for benefits that had accrued to members, after allowing for expected future increases in salaries.
A prepayment of £28.1m is included in debtors, this being the excess of the amount funded over the accumulated pension cost.
Smiths Industries operates post retirement healthcare benefit plans, principally at Grand Rapids in the United States. These costs areaccounted for on a basis similar to pensions. The liabilities in respect of the benefits are assessed by qualified independent actuaries andare fully accrued (see note 20). The major assumptions are interest rate 7% p.a., and medical inflation 7% p.a.
1996 1995 12 Employees £m £m
Staff costs during the year:Wages and salaries 268.9 250.1Social Security 27.3 22.6Company pension costs 7.6 6.8
303.8 279.5
The average number of persons employed was: 1996 1995
Aerospace 4,755 4,945Medical Systems 3,971 3,756Industrial 3,482 3,017
12,208 11,718
39
SI/1 Accounts vAW colour5 3/3/97 5:33 pm Page 39
13 Directors’ emoluments and interests
RemunerationThe Standing Committee of the Board referred to on page 26 determines the remuneration of Executive Directors including their annualbonus targets and share options. A report from the Standing Committee is set out on page 31.
The total remuneration of directors is as follows:
1996 1995£000 £000
Fees 100 88Salaries and benefits 1,196 1,120Performance related bonuses 519 416Deferred share scheme 211 141Pension to past director 6 6Pension contributions 42 89Compensation for loss of office – 245Ex-gratia payment to former director 42 –
2,116 2,105
The pension contributions are the proportion of the payments made to the pension trustees relating to the Executive Directors. The amounts are determined by the Company’s actuaries.
The remuneration of the Chairman & Chief Executive and Executive Directors is set out below:
Deferred shareSalary Bonus Benefits scheme Total
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Chairman & Chief ExecutiveSir Roger Hurn 380 365 190 182 21 15 109 82 700 644Executive DirectorsN V Barber 203 195 81 78 31 17 47 32 362 322G M Kennedy 190 180 95 72 21 14 43 27 349 293E Lindh (appointed 13.2.96) 65 – 29 – 4 – – – 98 –C S Taylor (resigned 31.3.95) – 91 – – – 10 – – – 101A M Thomson 150 50 75 20 21 4 12 – 258 74R Williams (retired 22.2.96) 99 160 49 64 11 19 – – 159 243
1,087 1,041 519 416 109 79 211 141 1,926 1,677
The deferred share scheme amounts relate to the previous year’s bonus.
With effect from 1 August 1996 Mr Butler-Wheelhouse was paid a salary of £350,000 a year: he will participate in the executive bonus andshare option schemes, and will be entitled to pension benefits.
Notes to the Accounts continued
40 Smiths Industries
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13 Directors’ emoluments and interests continued
The accrued pension benefits for Executive Directors were:
Years of Additional pension Accrued entitlement at year endservice at earned during the or at date of appointment
3 August 1996 year endedAge at or at date of 3 August 1996 3 August 1996 5 August 1995
3 August 1996 retirement £000 £000 £000
Sir Roger Hurn 58 37 18 256 238N V Barber 57 5 11 110 99G M Kennedy 56 23 11 118 107E Lindh 51 13 3 54 51A M Thomson 49 1 7 33 26R Williams 62 36 7 108 101
The gross emoluments excluding pension contributions of the Directors fell within the following bands:
1996 1995 1996 1995
£5,001 – £10,000 – 1 £240,001 – £245,000 – 1£10,001 – £15,000 – 1 £255,001 – £260,000 1 –£15,001 – £20,000 5 4 £290,001 – £295,000 – 1£70,001 – £75,000 – 1 £320,001 – £325,000 – 1£95,001 – £100,000 1 – £345,001 – £350,000 1 –
£100,001 – £105,000 – 1 £380,001 – £385,000 1 –£155,001 – £160,000 1 – £640,001 – £645,000 – 1
£695,001 – £700,000 1 –
Ordinary shares of 25p Ordinary shares of 25pDirector 3 August 1996 5 August 1995 3 August 1996 5 August 1995
Directors’ interests in the Company’s sharesN V Barber 91,031 68,733 E Lindh 13,728 †13,578K O Butler-Wheelhouse Nil *Nil K Orrell-Jones 2,000 2,000Sir Roger Hurn 137,412 84,387 A I H Pink Nil NilSir Alex Jarratt 5,333 5,333 Sir Peter Thompson 5,000 5,000G M Kennedy 35,318 24,503 A M Thomson 1,936 NilR F Leverton 1,000 Nil
*Interest on appointment on 1 August 1996†Interest on appointment on 13 February 1996
The Company has not been notified of any changes to the beneficial holdings of the Directors, their families and any connected personsbetween 3 August and 15 October 1996.
Sir Roger Hurn also has interests as a joint-trustee and a potential beneficiary in 4,080 ordinary shares of 25p held by a family trust.
41
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13 Directors’ emoluments and interests continued
Options Optionsheld on held on
3 August 5 August WeightedDirector Scheme 1996 1995 Average Options exercised Options granted
Exercise Date Exercise Market Date Exercise ExpiryNumber Number price exercised Number price price† of grant Number price date
Directors’ share options
Sir Roger Hurn A 193,666 408,615 445.19p 25/04/96 214,949 347.00p 705.42p
B 68,196 632.00p 20/12/95 68,196 632.00p 20/12/2005
C 6,061 6,061 294.44p
D 45,101 37,376 0.10p 25/04/96 10,150 0.10p 709.00p 06/12/95 17,875 0.10p 06/11/2002
N V Barber A 118,737 141,983 446.03p 29/05/96 23,246 347.00p 718.00p
B 33,964 632.00p 20/12/95 33,964 632.00p 20/12/2005
C 7,560 7,560 248.00p
D 17,156 12,223 0.10p 23/04/96 2,706 0.10p 708.00p 06/12/95 7,639 0.10p 06/11/2002
G M Kennedy A 114,630 177,457 425.61p 23/04/96 62,827 347.00p 708.00p
B 31,560 632.00p 20/12/95 31,560 632.0p 20/12/2005
C 6,324 6,324 305.96p
D 14,337 11,048 0.10p 23/04/96 3,763 0.10p 708.00p 06/12/95 7,052 0.10p 06/11/2002
E Lindh A 71,939 75,939* 383.82p 22/05/96 4,000 347.00p 712.00p
B 4,905 4,905* 632.00p
C 3,409 572.00p 17/05/96 3,409 572.00p 01/01/2004
D 7,511 7,511* 0.10p
A M Thomson A 62,500 62,500 480.00p
B 20,569 632.00p 20/12/95 20,569 632.00p 20/12/2005
C 3,015 572.00p 17/05/96 3,015 572.00p 01/01/2002
D 1,936 0.10p 06/12/95 1,936 0.10p 06/11/2002
KEY: A. The Smiths Industries (1984) Executive Share Option Scheme
B. The Smiths Industries 1995 Executive Share Option Scheme
C. The Smiths Industries 1982 SAYE Share Option Scheme
D. The Smiths Industries Senior Executive Deferred Share Scheme
* Options held at date of appointment (13 February 1996)†
Mid-market quotation from the London Stock Exchange Daily Official List or actual sale price if shares sold on date of acquisition
Notes: The high and low market prices of the ordinary shares during the period 5 August 1995 to 3 August 1996 were 724p and 522p, respectively.
The market price on 5 August 1995 was 544p and on 3 August 1996 was 724p.
All options held on 3 August 1996 were granted at exercise prices less than the market price on that date.
No options lapsed during the period 5 August 1995 to 3 August 1996.
No options have been granted or exercised or have lapsed between 3 August and 15 October 1996.
There are no performance criteria for the The Smiths Industries (1984) Executive Share Option Scheme or The Smiths Industries Senior Executive Deferred Share Scheme apart from
market price. The Smiths Industries 1995 Executive Share Option Scheme is subject to a performance criterion based on total shareholder return of the Company versus the total
return of the Engineering Sector of the FT-SE All Shares Index.
Deferred Share Scheme options were granted on 6 December 1995 at an exercise price of 0.1p per share and match shares purchased in the market by the grantee on that day.
Special provisions permit early exercise of SAYE Options in the event of retirement; redundancy; death; etc.
Full details of the Directors’ shareholdings and options are contained in the Register of Directors’ Interests in Shares (which is open to inspection).
Options held by Mr R Williams, who retired on 22 February 1996, are not included.
Notes to the Accounts continued
42 Smiths Industries
SI/1 Accounts vAW colour5 3/3/97 5:33 pm Page 42
Fixtures,Land and Plant and fittings, toolsbuildings machinery and equipment Total
14 Tangible fixed assets £m £m £m £m
ConsolidatedCost or valuationAt 6 August 1995 98.1 123.6 165.1 386.8 Exchange adjustments 1.7 3.7 2.0 7.4 Additions 10.0 13.2 17.5 40.7 Acquisitions 7.3 6.4 5.3 19.0 Disposals (1.5) (3.2) (8.2) (12.9)
At 3 August 1996 115.6 143.7 181.7 441.0
DepreciationAt 6 August 1995 28.9 83.1 108.1 220.1Exchange adjustments 0.8 2.6 1.4 4.8 Charge for the year 2.2 10.2 18.1 30.5 Acquisitions 0.8 4.4 3.6 8.8 Eliminated on disposals (0.3) (1.1) (7.1) (8.5)
At 3 August 1996 32.4 99.2 124.1 255.7
Net book valueAt 3 August 1996 83.2 44.5 57.6 185.3
At 5 August 1995 69.2 40.5 57.0 166.7
CompanyCost or valuationAt 6 August 1995 17.9 8.1 66.5 92.5 Additions 4.3 0.3 7.0 11.6 Disposals (1.3) (0.5) (2.1) (3.9)
At 3 August 1996 20.9 7.9 71.4 100.2
DepreciationAt 6 August 1995 1.7 5.8 42.3 49.8Charge for the year 0.2 0.5 7.7 8.4 Eliminated on disposals (0.2) (0.5) (1.8) (2.5)
At 3 August 1996 1.7 5.8 48.2 55.7
Net book valueAt 3 August 1996 19.2 2.1 23.2 44.5
At 5 August 1995 16.2 2.3 24.2 42.7
Consolidated Company£m £m
Land and buildingsCost 108.3 20.1Valuation 1974 7.3 0.8
115.6 20.9
Freehold 107.0 20.9Long leasehold 2.5 –Short leasehold 6.1 –
115.6 20.9
If land and buildings had not been revalued they would have been included at the following amounts:Cost 111.5 20.1Aggregate depreciation 31.7 1.7
43
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1996 199515 Capital commitments £m £m
Estimated commitments not included in the accounts:Company 1.3 1.9Subsidiaries 5.1 5.7
6.4 7.6
Amounts authorised by Directors but not committed:Company 9.3 15.1Subsidiaries 13.9 7.7
23.2 22.8
Consolidated Company
1996 1995 1996 199516 Investments and advances £m £m £m £m
At cost less amounts written off:Subsidiary Companies – .– 495.0 459.2Associated Companies 5.3 4.2 1.9 2.2Unlisted Investments – 0.4 – 0.4
5.3 4.6 496.9 461.8
Investments in subsidiariesShares at cost or valuation 261.8 194.7Due from subsidiaries 268.0 295.5
529.8 490.2Due to subsidiaries (34.8) (31.0)
495.0 459.2
The Company’s principal subsidiaries and their countries of incorporation are:
England USASmiths Industries Aerospace & Defence Systems Limited Smiths Industries, Inc.SIMS-Portex Limited Smiths Industries Aerospace & Defense Systems, Inc.*Eschmann Bros & Walsh Limited Smiths Industries Medical Systems, Inc.*Smiths Industries Industrial Group Limited SIMS-Deltec, Inc.*Air Movement (Holdings) Limited SIMS-Level 1, Inc.*Lighthome Limited Tutco, Inc.*SI Properties Limited Flexible Technologies, Inc.*
All the subsidiaries are 100% owned by the Company, apart from those marked* which are wholly owned by Smiths Industries, Inc.Shareholdings are of ordinary shares, ordinary stock units or common stock. All subsidiaries operate in their country of incorporation. Theinformation given above relates only to undertakings whose results or financial position principally affected the figures in these accounts.
Associated CompaniesThe Company owns 50% of the ordinary shares of Japan Medico Co. Limited and 30% of the ordinary shares of Mednova Co. Limited.Both companies are incorporated and operate in Japan.
Summarised information for the last financial year of these companies comprises:
£m
Sales 69.0Profit after interest 9.7Net assets excluding borrowings 48.5Borrowings 28.4
Notes to the Accounts continued
44 Smiths Industries
SI/1 Accounts vAW colour5 3/3/97 5:34 pm Page 44
Consolidated Company
1996 1995 1996 199517 Stocks £m £m £m £m
Stocks comprise:Raw materials and consumables 51.4 44.0 5.2 5.6Work in progress 53.9 53.1 24.4 20.4Finished goods 56.7 47.6 8.0 7.1
162.0 144.7 37.6 33.1Less: Payments on account 11.3 8.5 5.1 3.7
150.7 136.2 32.5 29.4
Consolidated Company
1996 1995 1996 199518 Debtors £m £m £m £m
Amounts falling due within one year:Trade debtors 183.6 158.1 37.7 34.3Amounts recoverable on contracts 22.8 22.0 8.4 8.4Amounts owed by subsidiaries – .– 2.3 19.9Other debtors 4.9 11.1 2.6 2.5Prepayments and accrued income 7.9 8.1 2.7 2.8
219.2 199.3 53.7 67.9Amounts falling due after more than one year:Other debtors 1.4 0.6 – 0.1Pensions prepayment 28.1 27.1 28.1 27.1
248.7 227.0 81.8 95.1
Consolidated Company
1996 1995 1996 199519 Creditors £m £m £m £m
Amounts falling due within one yearBank loans and overdrafts 50.7 35.9 0.4 0.2Floating rate loan notes 5.2 .– 5.2 .–Trade creditors 66.2 61.3 21.8 16.5Bills of exchange payable 1.4 1.5 – .–Amounts owed to subsidiaries – .– 0.9 0.8Other creditors 18.5 5.0 7.0 1.6Proposed dividend 32.2 28.2 32.2 28.2Corporate taxation 38.5 30.6 33.3 24.3Other taxation and social security costs 9.9 8.1 2.2 1.6Accruals 122.7 105.7 48.9 45.3
345.3 276.3 151.9 118.5
Amounts falling due after more than one year:8.34% Senior Notes 2002 64.9 62.1 – .–Floating rate loan notes 23.0 2.7 23.0 2.7Other loan notes 4.2 – – –Bank loans 0.7 0.8 – .–Other creditors 26.4 26.2 2.4 3.3
119.2 91.8 25.4 6.0
45
SI/1 Accounts vAW colour5 3/3/97 5:34 pm Page 45
19 Creditors
Bank loans and overdrafts at 3 August 1996 amounted to £51.4m (1995 £36.7m). Bank loans and overdrafts are repayable:
Within one year or on demand £50.7mWithin two to five years £0.7m
Smiths Industries, Inc. has in issue US$100m 8.34% Senior Notes 2002, guaranteed by the Company. Co-terminous interest rate swapswere taken out covering US$75m of these fixed rate borrowings, reducing the effective rate of interest in the year to 7.3%.
Floating rate loan notes carry interest at rates which vary from 0.45 of a percentage point below 3 – month Sterling LIBID to 1.0% above3 – month Sterling LIBOR. They are repayable:-
Within one year or on demand £5.2mWithin two to five years £21.7mAfter more than five years £1.3m
Other loan notes carry fixed interest rates varying from 8.5% p.a. to 10% p.a. They are repayable within two to five years.
At 3 August 1996 the Company had annual commitments under non-cancellable operating leases as follows:
Land and buildings Others£m £m
Expiring within one year 1.6 0.2Expiring within two to five years 3.2 0.9Expiring after five years 1.2 .–
6.0 1.1
Postretirement Deferred
Total healthcare Acquisitions taxation20 Provisions for liabilities and charges £m £m £m £m
ConsolidatedAt 6 August 1995 43.2 28.8 22.2 (7.8)Exchange adjustments 0.6 1.2 0.4 (1.0)Acquisitions 0.8 – – 0.8Profit and loss account (1.0) – 2.3 (3.3)Utilisation (9.5) (0.9) (6.3) (2.3)
At 3 August 1996 34.1 29.1 18.6 (13.6)
CompanyAt 6 August 1995 17.5 2.8 2.7 12.0Acquisitions 0.4 – – 0.4Profit and loss account (8.1) – – (8.1)Utilisation (1.6) – (0.6) (1.0)
At 3 August 1996 8.2 2.8 2.1 3.3
Consolidated Company
1996 1995 1996 1995£m £m £m £m
Deferred taxationAccelerated capital allowances 15.7 14.6 6.7 7.0Advance corporation tax (8.1) (7.0) (8.1) (7.0)Post-retirement benefits (11.5) (11.4) (0.9) (0.9)Short-term and other timing differences (9.7) (4.0) 5.6 12.9
(13.6) (7.8) 3.3 12.0
No provision has been made for potential taxation which could arise on the remittance to the United Kingdom of retained overseas earnings, as noremittances are envisaged in the foreseeable future which could give rise to a material liability.
Notes to the Accounts continued
46 Smiths Industries
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21 Acquisitions
Major acquisitions in the year comprised Level 1 Technologies Inc. in the USA for Medical Systems Group, and Adaptaflex and Air Movement Group in the UK for the Industrial Group.
Details of the consideration, book values of net assets at the date of acquisition, and adjustments to reflect the Company’s assessmentsof fair values are set out below. The resulting goodwill has been taken to goodwill reserve in the consolidated balance sheet
Consideration Goodwill Net assets£m £m £m
Level 1 Technologies 36.6 33.9 2.7 Adaptaflex 21.0 16.5 4.5Air Movement Group 46.6 33.8 12.8 M J A Dynamics 4.9 4.8 0.1 Other 0.4 0.4 .–
109.5 89.4 20.1
Book value Revaluation Total£m £m £m
Fixed assets 10.9 (0.7) 10.2 Stock 10.2 0.5 10.7 Debtors 23.7 23.7 Creditors (12.5) (9.4) (21.9) Taxation (3.1) 0.5 (2.6)
29.2 (9.1) 20.1
The goodwill on the above acquisitions has been calculated on a provisional basis pending the outcome of matters requiring further assessment.
Issued capital Consideration22 Called up share capital Shares £m £m
At 5 August 1995 301,516,333 75.4Exercise of share options 2,080,535 0.5 5.9
At 3 August 1996 303,596,868 75.9
The authorised capital at 3 August 1996 consisted of 400,000,000 shares of 25p each.At 3 August 1996 the following options had been granted and were still outstanding:
DatesSubscription normally
Date issued Number of shares prices exercisable
SAYE 1989 89,710 275.00p 1994/19961990 635,354 178.00p 1995/19971991 343,966 220.00p 1996/19981992 857,557 248.00p 1997/19991993 805,576 278.00p 1998/20001994 835,734 392.00p 1999/20011995 1,270,515 384.00p 2000/20021996 1,209,101 572.00p 2001/2003
Executive 1989 11,226 269.00p 1992/19991990 29,981 205.00p 1993/20001991 125,305 250.00p 1994/20011993 419,032 347.00p 1996/20031993 1,415,584 395.00p 1996/20031994 1,336,592 451.00p 1997/20041995 62,500 480.00p 1998/20051995 725,807 632.00p 1998/2005
47
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Share premium Revaluation Profit and Goodwillaccount reserve Other reserves loss account reserve
23 Share premium account and reserves £m £m £m £m £m
ConsolidatedAt 6 August 1995 24.2 3.8 220.3 461.1 (559.3)Premium on allotments 5.4Disposals (0.5) 0.5 0.5Retained profit 68.7Exchange rate changes 0.6Goodwill (89.4)
At 3 August 1996 29.6 3.3 220.9 530.3 (648.2)
CompanyAt 6 August 1995 24.2 0.6 182.3 269.5Premium on allotments 5.4Retained loss (3.2)Exchange rate changes 11.2Goodwill 0.2
At 3 August 1996 29.6 0.6 182.5 277.5
1996 199524 Movements in shareholders’ funds £m £m
Profit for the year 117.8 93.9Dividends (49.1) (43.4)
68.7 50.5Exchange variations 0.6 1.7Share issues 5.9 5.7Goodwill – on acquisitions (89.4) (44.4)
– on disposal 0.5 .–
Net decrease – 1995 increase – in shareholders’ funds (13.7) 13.5Shareholders’ funds: at 5 August 1995 225.5 212.0
at 3 August 1996 211.8 225.5
1996 199525 Contingent liabilities £m £m
The Company has guaranteed the 8.34% Senior Notes 2002 privately placed by a subsidiary 64.9 62.1
Notes to the Accounts continued
48 Smiths Industries
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1996 199526 Acquisition of subsidiary companies £m £m
Fixed assets 10.2 10.4Stocks 10.7 11.2Debtors 23.7 19.0Creditors (21.9) (36.0)Taxation (2.6) 2.6
20.1 7.2Goodwill 89.4 44.4
Net assets acquired/consideration 109.5 51.6
Satisfied by cash (£77.7m) and loan notes (£25.6m) (103.3) (51.6)Deferred consideration (5.8) .–Prior year acquisition (0.4) .–
(109.5) (51.6)
1996 199527 a) Analysis of cash and cash equivalents £m £m
Cash at bank and on deposit 120.4 102.3Bank loans and overdrafts (51.4) (35.9)
69.0 66.4Items exceeding three months’ maturity when acquired
Deposits – (20.0)Bank loans 51.4 35.9
120.4 82.3
b) Analysis of change in cash and cash equivalentsAt 6 August 1995 82.3 45.3Net cash inflow 38.1 37.0
At 3 August 1996 120.4 82.3
Share capitaland share premium Borrowings
c) Analysis of changes in financing £m £m
At 6 August 1995 99.6 101.5Cash inflow from financing 5.9 42.2Exchange rate changes – 5.0
At 3 August 1996 105.5 148.7
28 Summary of the change from net cash to net borrowings(defined as all borrowings, including loan notes, less cash at bank and on deposit) £m
At 6 August 1995 – net cash 0.8Exchange rate changes (5.0)Net decrease in deposits (20.0)Net increase in borrowings (42.2)Increase in cash and cash equivalents 38.1
At 3 August 1996 – net borrowings (28.3)
49
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1996 1995 1994 1993 1992£m £m £m £m £m
Turnover 1,008.4 899.3 766.3 701.4 656.7Operating profit 168.1 140.9 114.1 100.5 90.8Net interest (2.7) (2.4) 1.7 6.7 12.4Profit before exceptional items 165.4 138.5 115.8 107.2 103.2Exceptional items 5.0 (0.5) 1.8 (2.9) 0.2Profit before taxation 170.4 138.0 117.6 104.3 103.4Profit after taxation 117.8 93.9 79.7 70.6 69.4Shareholders’ funds 211.8 225.5 212.0 266.7 330.0Represented by:Fixed assets 190.6 171.3 160.1 147.7 123.2Net current assets 49.5 53.4 72.3 85.1 86.7Net cash (28.3) 0.8 (20.4) 33.9 120.1
Funds employed 211.8 225.5 212.0 266.7 330.0Goodwill 648.2 559.3 514.9 415.5 312.3
Shareholder investment 860.0 784.8 726.9 682.2 642.3
RatiosOperating profit: turnover (%) 16.7 15.7 14.9 14.3 13.8Profit before exceptional items: shareholder investment (%) 19.2 17.6 15.9 15.7 16.1Taxation (%) 30.9 32.0 32.2 32.3 32.9Cash-flowCash-flow from operations (£m) 149.0 139.6 128.9 119.5 101.5Free cash-flow (£m) 104.6 109.1 108.2 96.6 75.9(before acquisitions and dividends, after capital expenditure)Free cash-flow per share (p) 34.5 36.4 36.2 32.6 25.8Earnings per share before exceptional items (p) 36.6 30.7 26.1 24.3 23.5DividendsPence per share 16.2 14.40 13.00 11.85 11.25Times covered 2.2 2.1 2.0 2.1 2.1Number of employees (000’s) UK 6.5 6.1 6.3 6.7 6.6Overseas 6.3 6.2 5.4 4.5 4.6
Five Year Review
50 Smiths Industries
SI/1 Accounts vAW colour5 3/3/97 5:34 pm Page 50
1996 1995£m £m
Turnover 1,008.4 899.3Deduct:Purchased materials and services 501.4 447.9
Value added 507.0 451.4
% %
Utilised as followsWages, pension contributions and employee benefits 303.8 60.0 279.5 61.9Reorganisation costs 4.6 0.9 2.3 0.5Taxation 52.6 10.4 44.1 9.8Net interest 2.7 0.5 2.4 0.5Exceptional items (5.0) (1.0) 0.5 0.1Dividends 49.1 9.7 43.4 9.6Depreciation 30.5 6.0 28.7 6.4Retained profit 68.7 13.5 50.5 11.2
Value added 507.0 100.0 451.4 100.0
Analysis of Ordinary Shareholders: 4 October 1996
% of total Class of Shareholder No. of Holders No. of Shares Listed Shares
Insurance Companies 43 12,994,101 4.28Pension Funds 13 2,704,101 0.89Banks 14 76,860 0.02Nominees 9,148 256,440,037 84.40Limited Companies and other Corporate Bodies 1,262 16,317,574 5.37Individuals 7,061 15,315,842 5.04
Total 17,541 303,848,515 100.00
Statement of Value Added
51
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52 Smiths Industries
Organisation and Management
Single-Use ProductsAnaesthesia, respiratory therapy and intensive careTracheal, tracheostomy tubes andconnector systems, breathing andresuscitation systems, epiduralanaesthesia kits, patient monitoring.
General surgeryThoracic and general wound drainage devices.
CardiovascularIntravascular and embolectomycatheters, infusion systems, bloodpressure transducers.
Med
ical
Sys
tem
s SIMS Portex & EuropeSIMS Portex LimitedSIMS Medical Distribution LimitedSIMS SA – France Laboratoire Portex SA – Francepvb medizintechnik GmbH – GermanyMedic-Eschmann HmbH – Germany
Community CareSimcare
Capital EquipmentEschmann Equipment
PacificSIMS Pte Ltd – SingaporeSIMS Japan
North AmericaSIMS NASIMS Inc. – USASIMS Deltec Inc. – USASIMS Level 1 Inc. – USARespiratory Support Products Inc. – USASIMS Canada
DiagnosticsInstruments and blood gas analysis kits.
Community CareOstomy and incontinenceA wide range of products for hospital and community use.
UrologyFoley and specialised balloon catheters.
Drug delivery systemsImplantable ports and ambulatory infusionpumps.
Temperature managementBlood and intravenous fluid warmingsystems; core body temperature probes;disposable thermal blankets.
Crew information systemsHead-up displays, head-down displays,control displays, flight instruments,interactive voice systems.
Data control systemsFlight recorders, data transfer systems,health & usage monitoring systems.
Engine control systemsElectronic engine controls, transducers.
Flight management systemsFlight management computers.
Ground EquipmentAir data test sets, automated test equipment.
Aero
spac
e
Civil SystemsBasingstoke; Cheltenham;Malvern, Pennsylvania; Grand Rapids, Michigan
Defence SystemsStamford, Connecticut (International) Grand Rapids, MichiganFlorham Park, New JerseyClearwater, FloridaCheltenhamNew AddingtonHamble
Naval and MarineKelvin Hughes Limited, HainaultCharts and Maritime Supplies, HainaultLokata Limited, Hainault
Kelvin Hughes Observator bv, RotterdamA/S Kelvin Hughes, Aarhus
Product SupportCheltenhamHeathrowClearwaterSeattleMelbourneTorontoSingapore
Mission management systemsStores management systems, navigation attack systems.
Marine electronicsRadar systems, integrated navigationsystems, communications, charts & maritime supplies.
Navigation & guidance systemsAttitude and heading reference systems, inertial control measurement units, land systems.
Flex-TekFlexible ducting and conduit for consumerdurable, air-conditioning, heating andventilation, automotive and industrialapplications.
Vent-AxiaVentilation and fan systems for domestic,commercial and industrial applications.Fans for domestic and industrialappliances. Heating elements.
Indu
stri
al
Flex-TekUS: Abbeville, South Carolina; Los Angeles, California; Plymouth, IndianaUK: Birmingham, Glasgow, SloughGermany: Hamburg, LübeckFrance: Courbevoie Switzerland: Lugano Italy: BisuschioSpain: Barcelona
Vent-AxiaUS: Cookeville, TennesseeUK: Dudley, Crawley, Chichester, Cheadle, WitneyGermany: Schwenningen
EngineeringUS: Wallingford, Connecticut; Los Angeles,California; San Francisco, CaliforniaUK: Knaresborough, London, NewtownRugby, Slough, Witney, Germany: Bad Homburg
Hypertac InterconnectUK: LondonUSA: Hudson, Massachusetts; Sunnyvale, CaliforniaGermany: Deggendorf France: AsnièresItaly: Genova-Sestri
EngineeringProducts for interconnection and cabling in telecommunications,industrial, aerospace and defence.Specialised engineering products in the fields of industrial ignition, polymers and hydraulic systems.
Operating Businesses Areas of Business
Operating Businesses Areas of Business
Operating Businesses Areas of Business
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 52
53
George Kennedy Chairman
Michael WallsDirector & Group Controller
Malcolm CarlisleDirector, Regulatory Affairs & Legal Adviser
Don Cooper Director, Business Development
Bryan Muddell Director, Business Planning
EquipmentOperating theatresOperating tables, electrosurgery, suction systems.
SterilisationSteam autoclaves for hospitals/ dental surgeries.
Paul Battersby Managing Director, Eschmann Equipment
Tony Beran President, Respiratory Support Products Inc.
David Buyher President, SIMS North America
Peter EiseleGeschäftsführer, pvb GmbH
John HertigPresident, SIMS Level1 Inc.
Martin Jamieson Managing Director, SIMS Portex & Europe
Ken LittlePresident, SIMS Canada
Ray MorganManaging Director, SIMS Medical Distribution Limited
Jeff Spielman President, SIMS Inc.
Jim StittPresident, SIMS Deltec Inc.
Norman BarberChairman
Ian DonovanDirector & Group Controller
George DonovanVP Government Liaison, USA
Nigel HughesDirector, Technology
Graham ThorntonDirector, Strategy & Business Development
Lee BartholdVP & General Manager, Civil Systems,Malvern
Vehicle management systemsFuel management systems, utilitiesmanagement systems, electrical powermanagement systems.
Mike BridgmanDirector and General Manager, Controls and Utilities, Civil Systems UK.
Doug ClarkPresident, Civil Systems
Robert EhrPresident, Defense Systems, North America
Colin HowDirector and General Manager, EngineAccessories/HUMS, Civil Systems UK
Jerry HinesPresident, Defense Systems, International, USA
James KirbyGeneral Manager, Instruments and Displays,Civil Systems UK
Einar LindhChairman
Brian KnightDirector & Group Controller
Martin JonesManaging Director, Engineering
Roger EllisManaging Director, Hypertac Interconnect
Peter NorrisManaging Director, Vent-Axia
Steve LarawayManaging Director, Flex-Tek Europe
Tedd SmithPresident, Flex-Tek US
Ken BaileyManaging Director, Lodge Ignition
Geoff BallManaging Director, Air Movement Group
Phil BattleManaging Director, Flexible Ducting
Giovanni CodaManaging Director, Interplas
Dick DowneyPresident, Hypertronics
Alan EldretManaging Director, Sifan Systems
Arthur FotheringhamManaging Director, Unitex
Bruce FraserManaging Director, Elkay
Bruce HendersonManaging Director, Icore
Tony JonesManaging Director, Hypertac
Giuseppe LancellaGeneral Manager, Connei
Mike MahoneyPresident, Tutco
Peter PageExecutive VP, Times Microwave
Jean-Pierre RegeDirecteur General, FRB Connectron
Kevin SargeantManaging Director, Vent-Axia (Crawley)
Mike WallaceManaging Director, Hydraulics
John LeggManaging Director, Product Support
Nigel PlantDirector and General Manager, Fuel Systems,Civil Systems UK
David SheppardManaging Director, Naval & Marine
Grahame StovoldManaging Director, Defence Systems, Newmark
Keith WestonDirector and General Manager, Engine Controls, Civil Systems UK
Nick WiltonManaging Director, Defence Systems, Cheltenham
Key Personnel
Key Personnel
Key Personnel
Hypertac Interconnect
A wide range of high integrity electricalconnectors, including printed circuitboards, rectangular and circular products.
Sir Roger HurnChairman & Chief Executive
Keith Butler-WheelhouseChief Executive (as from 19.11.96)
Norman BarberChairman, Aerospace group
George KennedyChairman, MedicalSystems group
Einar LindhChairman, Industrial group
Alan ThomsonFinancial Director
Ron AlbrechtVP Administration,North America
Stephen AubreyReal Estate
Donald BroadInternal Audit
Alan CanteloTreasurer
Jonathan Flint Patents
David FlowerdayStrategic Finance
Jeff HawkesChief Accountant
Peter MasonTaxation
Russell PlumleyPublic Affairs
Alan Smith(Associate Director)Secretary & Solicitor
David SpencerHuman Resources
Robin TauntBusinessDevelopment
Martyn Wenzerul(Associate Director)Finance
Corporate Staff DirectorsExecutive Directors
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 53
54 Smiths Industries
Notice is hereby given that the eighty-second Annual General Meeting of Smiths Industries Public Limited Company will be
held at 765 Finchley Road, London NW11 8DS on Tuesday 19 November 1996 at 12.00 noon for the following purposes:
Ordinary business
1. To adopt the reports of the directors and the auditors and the audited accounts for the 52 weeks ended 3 August 1996.
2. To declare a final dividend on the ordinary shares.
To re-appoint the following directors:
3. Sir Roger Hurn
4. Mr Norman Victor Barber
5. Mr Keith Oliver Butler-Wheelhouse
6. Mr Einar Lindh
7. To appoint Clark Whitehill as joint auditors to the Company.
8. To appoint Price Waterhouse as joint auditors to the Company.
9. To authorise the directors to fix the remuneration of the joint auditors.
Special business
10. To consider and, if thought fit, pass the following ordinary resolution:
That, subject to and in accordance with Article 6 of the Articles of Association of the Company, the directors be and are
hereby authorised to allot relevant equity securities having a nominal value not exceeding £25,299,739 in aggregate and that
all previous authorities under section 80 of the Companies Act 1985 are hereby revoked and shall henceforth cease to
have effect.
11. To consider and, if thought fit, pass the following special resolution:
That, subject to and in accordance with Article 7 of the Articles of Association of the Company, the directors be and are
hereby authorised to allot equity securities for cash, provided that this power shall be limited for the purposes described
in paragraphs (a) and (b) of Article 7 and, for the purposes of limitation of said power referred to in paragraph (b) of Article
7, the nominal amount therein mentioned shall be £3,794,960.
12. To consider and, if thought fit, pass the following special resolution:
That the Company is hereby generally and unconditionally authorised to make market purchases (within the meaning
of section 163 of the Companies Act 1985) of ordinary shares of 25p each in the capital of the Company (“ordinary
shares”) provided that:
(a) the maximum number of ordinary shares hereby authorised to be purchased is 15,179,843;
Notice of Annual General Meeting
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 54
55
(b) the minimum price which may be paid for ordinary shares is 25p per ordinary share;
(c) the maximum price which may be paid for an ordinary share is an amount equal to 105% of the average middle market
quotations for an ordinary share, as derived from the London Stock Exchange Daily Official List, for the ten business days
immediately preceding the day on which the ordinary share is purchased;
(d) the authority hereby conferred shall expire at the conclusion of the next general meeting of the Company, unless such
authority is renewed at such time; and
(e) the Company may make a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry
of such authority which will or may be executed wholly or partly after the expiry of such authority and may make a
purchase in pursuance of any such contract.
By Order of the Board
Alan Smith
Secretary
15 October 1996
London NW11 8DS
Notes1. A member entitled to attend and vote may appoint a proxy or proxies to attend and, on a poll, vote on his behalf. A proxy need not be
a member. Proxy Forms must be deposited not later than 48 hours before the Meeting to be effective. In the case of a corporation, theappointment of a proxy must be made either under its common seal or by a duly authorised officer or attorney. In the case of jointholders, the vote of the first named on the register will be accepted to the exclusion of other joint holders.
2. A copy of the contract of service of each director of the Company with the Company or any of its subsidiaries will be available forinspection at the registered office of the Company during normal business hours on any weekday (Saturdays and Bank Holidaysexcepted) from the date of this Notice until the conclusion of the Annual General Meeting on 19 November 1996.
3. Subject to the final dividend being approved at the Annual General Meeting, dividend warrants will be payable on 8 January 1997 tothe ordinary shareholders on the register at the close of business on 5 November 1996.
4. The market value of an ordinary share on 31 March 1982 for the purposes of capital gains tax was:
Ordinary shares 91.25p (taking into account the sub-division of 50p shares into 25p shares on 14 January 1985).
5. Although copies of the Annual Report are distributed to share- and option-holders, only ordinary shareholders, or their proxies, areentitled to attend and vote at the Meeting.
SI/1 Annual vAW colour5 PL2 3/3/97 5:40 pm Page 55
56 Smiths Industries
765 Finchley Road London NW11 8DS
Tel: +44 (0) 181 458 3232 Fax: +44 (0) 181 458 4380
E-Mail: plc@smithsind.co.uk http://www.smithsind.com Pub
lishe
d b
y B
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Plc
P
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Financial Calendar
1996October
28 Ordinary shares final dividend ex-div date.
November
5 Ordinary shares final dividend record date.
19 Annual General Meeting.
1997January
8 Ordinary shares final dividend payment date.
March
17 CREST “C” Date (provisional).
April
9 1996/97 interim results announced.
21 Ordinary shares interim dividend ex-div date.
29 Ordinary shares interim dividend record date.
June
6 Ordinary shares interim dividend payment date.
August
2 Smiths Industries financial year end.
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