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"f17515": {
"value": "BASIS OF PREPARATION The accounts have been prepared in accordance with UK adopted International Accounting
\nStandards in conformity with the requirements of the Companies Act 2006.
\nThe consolidated financial statements have been prepared under the historical cost convention
\nmodified to include revaluation of certain financial instruments, share options and pension assets
\nand liabilities, held at fair value as described below.",
"dimensions": {
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},
"f17516": {
"value": "BASIS OF PREPARATION The accounts have been prepared in accordance with UK adopted International Accounting
\nStandards in conformity with the requirements of the Companies Act 2006.
\nThe consolidated financial statements have been prepared under the historical cost convention
\nmodified to include revaluation of certain financial instruments, share options and pension assets
\nand liabilities, held at fair value as described below.
\nGOING CONCERN
\nThe Directors are satisfied that the Group has adequate resources to continue to operate for a
\nperiod not less than 12 months from the date of approval of the financial statements and that
\nthere are no material uncertainties around their assessment. Accordingly, the Directors continue
\nto adopt the going concern basis of accounting.
\nThe Group\u2019s business activities, together with the factors likely to affect its future development,
\nperformance and position, are set out in the Strategic Report on pages 8 to 77. The Group\u2019s
\nfinancial position, cash-flows, liquidity and borrowing facilities are described in the CFO review
\nsection on pages 21 to 23.
\nOther factors considered by the Board as part of its going concern assessment included the
\ninherent uncertainties in cash-flow forecasts. Based on the above, the Directors have concluded
\nthat the Group is well placed to manage its financing and other business risks satisfactorily, and
\nthey have a reasonable expectation that the Group will have adequate resources to continue in
\noperation for at least 12 months from the signing date of these financial statements. They
\ntherefore consider it appropriate to adopt the going concern basis of accounting in preparing the
\nfinancial statements.
\nKEY ESTIMATES AND SIGNIFICANT JUDGEMENTS
\nThe preparation of the accounts in conformity with generally accepted accounting principles
\nrequires management to make estimates and judgements that affect the reported amounts of
\nassets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts
\nand the reported amounts of revenues and expenses during the reporting period. Actual results
\nmay differ from these estimates.
\nThe key sources of estimation uncertainty together with the significant judgements and
\nassumptions used for these consolidated financial statements are set out below.
\nSOURCES OF ESTIMATION UNCERTAINTY
\nIMPAIRMENT REVIEWS OF INTANGIBLE ASSETS
\nIn carrying out impairment reviews of intangible assets, a number of significant assumptions have to
\nbe made when preparing cash-flow projections to determine the value in use of the asset or cash
\ngenerating unit (CGU). These include the future rate of market growth, discount rates, the market
\ndemand for the products acquired, the future profitability of acquired businesses or products,
\nlevels of reimbursement, and success in obtaining regulatory approvals. If actual results differ or
\nchanges in expectations arise, impairment charges may be required which would adversely impact
\noperating results.
\nCritical estimates, and the effect of variances in these estimates, are disclosed in note\u00a011.
\nRETIREMENT BENEFITS
\nDetermining the value of the future defined benefit obligation involves significant estimates in
\nrespect of the assumptions used to calculate present values. These include future mortality,
\ndiscount rate and inflation. The Group uses previous experience and independent actuarial advice
\nto select the values for critical estimates. A portion of UK pension liabilities are insured via bulk
\nannuity policies that match all or part of the scheme obligation to identified groups of pensioners.
\nThese assets are valued by an external qualified actuary at the actuarial valuation of the
\ncorresponding liability, reflecting this matching relationship.
\nThe Group\u2019s principal defined benefit pension plans are in the UK and the US and these have been
\nclosed so that no future benefits are accrued. Critical estimates for these plans, and the effect of
\nvariances in these estimates, are disclosed in note\u00a08.
\nPROVISIONS FOR LIABILITIES AND CHARGES
\nThe Group has made provisions for claims and litigations where it has had to defend itself against
\nproceedings brought by other parties. These provisions have been made for the best estimate of
\nthe expected expenditure required to settle each obligation, although there can be no guarantee
\nthat such provisions (which may be subject to potentially material revision from time to time) will
\naccurately predict the actual costs and liabilities that may be incurred. The most significant of
\nthese litigation provisions are described below.
\nJohn Crane, Inc. (JCI), a subsidiary of the Group, is one of many co-defendants in litigation relating
\nto products previously manufactured which contained asbestos. Provision of \u00a3204m (FY2022:
\n\u00a3229m) has been made for the future defence costs which the Group is expected to incur and the
\nexpected costs of future adverse judgements against JCI. Whilst well-established incidence
\ncurves can be used to estimate the likely future pattern of asbestos-related disease, JCI\u2019s claims
\nexperience is significantly impacted by other factors which influence the US litigation
\nenvironment. These can include: changing approaches on the part of the plaintiffs\u2019 bar; changing
\nattitudes amongst the judiciary at both trial and appellate levels; and legislative and procedural
\nchanges in both the state and federal court systems. Because of the significant uncertainty
\nassociated with the future level of asbestos claims and of the costs arising out of the related
\nlitigation, there can be no guarantee that the assumptions used to estimate the provision will
\nresult in an accurate prediction of the actual costs that will be incurred.
\nIn quantifying the expected costs JCI takes account of the advice of an expert in asbestos liability
\nestimation. The following estimates were made in preparing the provision calculation:
\n\u2013
The period over which the expenditure can be reliably estimated is judged to be ten years,
\nbased on past experience regarding significant changes in the litigation environment that
\nhave occurred every few years and on the amount of time taken in the\u00a0past for some of those
\nchanges to impact the broader asbestos litigation environment. See note 23 for a sensitivity
\nanalysis showing the impact on the provision of reducing or increasing this\u00a0time horizon; and
\n\u2013
The future trend of legal costs, the rate of future claims filed, the rate of successful resolution
\nof claims, and the average amount of\u00a0judgements awarded have been projected based on the
\npast history of JCI claims and well-established tables of asbestos incidence projections, since
\nthis is the best available evidence. Claims history from other defendants is not used to calculate
\n
\n
\n
the provision because JCI\u2019s defence strategy generates a significantly different pattern of legal
\ncosts and settlement expenses. See note\u00a023 for a sensitivity analysis showing the range of
\nexpected future spend.
\nTiteflex Corporation, a subsidiary of the Group in the Flex-Tek division, has received a number of
\nclaims from insurance companies seeking recompense on a subrogated basis for the effects of
\ndamage allegedly caused by lightning strikes in relation to its flexible gas piping product. It has
\nalso received a number of product liability claims regarding this product, some in the form of
\npurported class actions. Titeflex Corporation believes that its products are a safe and effective
\nmeans of delivering gas when installed in accordance with the manufacturer\u2019s instructions and
\nlocal and national codes; however, some claims have been settled on an individual basis without
\nadmission of liability. Provision of \u00a341m (FY2022: \u00a352m) has been made for the costs which the
\nGroup is expected to incur in respect of these claims. In preparing the provision calculation, key
\nestimates have been made about the impact of safe installation initiatives on the level of future
\nclaims. See note 23 for a sensitivity analysis showing the impact on the provision of reducing or
\nincreasing the expected impact. However, because of\u00a0the significant uncertainty associated with
\nthe future level of claims, there can be no guarantee that the assumptions used to estimate the
\nprovision will result in an accurate prediction of the actual costs that may be incurred.
\nTAXATION
\nThe Group has recognised deferred tax assets of \u00a375m (FY2022:\u00a0\u00a3103m) relating to losses and
\n\u00a360m (FY2022: \u00a369m) relating to the John Crane, Inc. and Titeflex Corporation litigation
\nprovisions. The recognition of assets pertaining to these items requires management to make
\nsignificant estimates as to the likelihood of realisation of these deferred tax assets and the
\nphasing and attribution of future taxable profits. This is based on a number of factors, which
\nmanagement use to assess the expectation that the benefit of these assets will be realised,
\nincluding expected future levels of operating profit, expenditure on litigation, pension
\ncontributions and the timing of the unwind of other tax positions.
\nTaxation liabilities included provisions of \u00a346m (FY2022: \u00a338m), the majority of which related to
\nthe risk of challenge to the geographic allocation of profits by tax authorities.
\nIn addition to the risks provided for, the Group faces a variety of other tax risks, which result from
\noperating in a complex global environment, including the ongoing reform of both international and
\ndomestic tax rules, new and ongoing tax audits in the Group\u2019s larger markets and the challenge to
\nfulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of
\nthe Group\u2019s global operations.
\nThe Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24
\nmonths. Due to the uncertainty associated with such tax items, it is possible that the conclusion
\nof\u00a0open tax matters may result in a final outcome that varies significantly from the amounts
\nnoted\u00a0above.
\nREVENUE RECOGNITION
\nRevenue is recognised as the performance obligations to deliver products or services are satisfied
\nand revenue is recorded based on the amount of consideration expected to be received in exchange
\nfor satisfying the performance obligations.
\nSmiths Detection and Smiths Interconnect have multi-year contractual arrangements for the sale
\nof\u00a0goods and services. Where these contracts have separately identifiable components with distinct
\npatterns of delivery and customer acceptance, revenue is accounted for separately for each
\nidentifiable component.
\nThe Group enters into certain contracts for agreed fees that are performed across more than one
\naccounting period and revenue is recognised over time. Estimates are required at the balance sheet
\ndate when determining the stage of completion of the contract activity. This assessment requires the
\nexpected total costs of the contract and the remaining costs to complete the contract to be estimated.
\nAt 31 July 2023, the Group held contracts with a total value of \u00a3109m (2022: \u00a3181m), of which
\n\u00a383m\u00a0(2022: \u00a3135m) had been delivered and \u00a326m (2022: \u00a347m) remains fully or partially
\nunsatisfied. \u00a324m of the unsatisfied amount is expected to be recognised in the coming year, with
\nthe remainder being recognised within two years. A 5% increase in the remaining cost to complete
\nthe contracts would have reduced Group operating profit in the current year by less than \u00a31m
\n(2022:\u00a0less than \u00a32m).
\nVALUATION OF FINANCIAL ASSETS
\nFollowing the sale of Smiths Medical the Group has recognised a financial asset for the fair value of
\nthe US$100m additional sales consideration that is contingent on the future share price
\nperformance of the enlarged ICU Medical, Inc (ICU) business.
\nThe earnout requires the Group to retain beneficial ownership of at least 1.25 million ICU shares and
\nfor the ICU share price to average US$300 or more for any 30-day period during the first three years
\npost-completion, or for any 45-day period in the fourth year post-completion.
\nAn external valuation firm has been engaged to undertake Monte Carlo valuation simulations in
\norder to estimate the probability of the future ICU share price exceeding US$300. These valuation
\nsimulations have determined a fair value of \u00a313m (US$17m).
\nSIGNIFICANT JUDGEMENTS MADE IN APPLYING ACCOUNTING
\nPOLICIES
\nBUSINESS COMBINATIONS
\nOn the acquisition of a business, the Group has to make judgements on the identification of specific
\nintangible assets which are recognised separately from goodwill and then amortised over their
\nestimated useful lives. These include items such as brand names and customer lists, to which
\nvalue is first attributed at the time of acquisition. The capitalisation of these assets and the related
\namortisation charges are based on judgements about the value and economic life of such items.
\nWhere acquisitions are significant, appropriate advice is sought from professional advisers before
\nmaking such allocations.
\n
\n
\n
RETIREMENT BENEFITS
\nAt 31 July 2023 the Group has recognised \u00a3195m of retirement benefit assets (FY2022: \u00a3309m)
\nand a net pension asset of \u00a389m (FY2022: \u00a3194m), principally relating to the Smiths Industries
\nPension Scheme (SIPS), which arises from the rights of the employers to recover the surplus at
\nthe end of the life of the scheme.
\nThe recognition of this surplus is a significant judgement. There is judgement required in
\ndetermining whether an unconditional right of refund exists based on the provisions of the
\nrelevant Trust deed and rules. Having taken legal advice with regard to the rights of the Group
\nunder the relevant Trust deed and rules, it has been determined that the surplus is recoverable by
\nthe Group and therefore can be recognised. In particular, in the ordinary course of business, the
\ntrustees of the scheme do not have a unilateral power to terminate and wind up the scheme or
\naugment benefits. If the pension scheme was wound up while it still had members, the scheme
\nwould need to buy out the benefits of all members. The buyout would cost significantly more than
\nthe carrying value of the scheme liabilities within these financial statements which are calculated
\nin accordance with IAS 19: Employee benefits.
\nCAPITALISATION OF DEVELOPMENT COSTS
\nExpenditure incurred in the development of major new products is capitalised as internally
\ngenerated intangible assets only when it has been judged that strict criteria are met, specifically
\nin relation to the products\u2019 technical feasibility and commercial viability (the ability to generate
\nprobable future economic benefits).
\nThe assessment of technical feasibility and future commercial viability of development projects
\nrequires significant judgement and the use of assumptions. Key judgements made in the
\nassessment of future commercial viability include:
\n\u2013
Scope of work to achieve regulatory clearance (where required) \u2013 including the level of testing
\nevidence and documentation;
\n\u2013
Competitor activity \u2013 including the impact of potential competitor product launches on the
\nmarketplace and customer demand; and
\n\u2013
Launch timeline \u2013 including time and resource required to establish and support the
\ncommercial launch of a new product.
\nTAXATION
\nAs stated in the previous section \u2018Sources of estimation uncertainty\u2019, the Group has recognised
\ndeferred tax assets of \u00a375m (FY2022:\u00a0\u00a3103m) relating to losses and \u00a360m (FY2022: \u00a369m) relating
\nto the John Crane, Inc. and Titeflex Corporation litigation provisions. The decision to recognise
\ndeferred tax assets requires judgement in determining whether the Group will be able to utilise
\nhistorical tax losses in future periods. It has been concluded that there are sufficient taxable
\nprofits in future periods to support recognition.
\nThe Group has also applied judgement in the decisions made to recognise provisions against
\nuncertain tax positions; please see note 6 for further details.
\nPRESENTATION OF HEADLINE PROFITS AND ORGANIC GROWTH
\nIn order to provide users of the accounts with a clear and consistent presentation of the
\nperformance of the Group\u2019s ongoing trading activity, the income statement is presented in a
\nthree-column format with \u2018headline\u2019 profits shown separately from non-headline items. In
\naddition, the Group reports organic growth rates for sales and profit measures.
\nSee note 1 for disclosures of headline operating profit and note 29 for more information about the
\nalternative performance measures (\u2018APMs\u2019) used by the Group.
\nJudgement is required in determining which items should be included as non-headline. The
\namortisation/impairment of acquired intangibles, legacy liabilities, material one-off items and
\ncertain re-measurements are included in a separate column of the income statement. See note 3
\nfor a breakdown of the items excluded from headline profit.
\nCalculating organic growth also requires judgement. Organic growth adjusts the movement
\nin\u00a0headline performance to exclude the impact of foreign exchange, restructuring costs
\nand\u00a0acquisitions.
\nSIGNIFICANT ACCOUNTING POLICIES
\nBASIS OF CONSOLIDATION
\nThe Group\u2019s consolidated accounts include the financial statements of Smiths Group plc (the
\n\u2018Company\u2019) and all entities controlled by the Company (its subsidiaries). A list of the subsidiaries
\nof Smiths Group plc is provided on pages 205 to 210.
\nThe Company controls an entity when it (i) has power over the entity; (ii) is exposed or has rights to
\nvariable returns from its involvement with the entity; and (iii) has the ability to affect those returns
\nthrough its power over the entity. The Group reassesses whether or not it controls a subsidiary if
\nfacts and circumstances indicate that there are changes to one or more of these three elements
\nof control. Subsidiaries are fully consolidated from the date on which control is obtained by the
\nCompany to the date that control ceases.
\nWhere the Group loses control of a subsidiary, the assets and liabilities are derecognised along
\nwith any related non-controlling interest and other components of equity. Any resulting gain or
\nloss is recognised in the income statement. Any interest retained in the former subsidiary is
\nmeasured at fair value when control is lost.
\nThe non-controlling interests in the Group balance sheet represent the share of net assets of
\nsubsidiary undertakings held outside the Group. The movement in the year comprises the profit
\nattributable to such interests together with any dividends paid, movements in respect of corporate
\ntransactions and related exchange differences.
\nInterests in associates are accounted for using the equity method. They are initially recognised at
\ncost, which includes transaction costs. Subsequent to initial recognition, the Group financial
\nstatements include the Group\u2019s share of the profit or loss and other comprehensive income of
\nequity-accounted investees, until the date on which significant influence ceases.
\nAll intercompany transactions, balances, and gains and losses on transactions between Group
\ncompanies are eliminated on consolidation.
\n
\n
\n
FOREIGN CURRENCIES
\nThe Company\u2019s presentational currency and functional currency is sterling. The financial position
\nof all subsidiaries and associates that have a functional currency different from sterling are
\ntranslated into sterling at the rate of exchange at the date of that balance sheet, and the income
\nand expenses are translated at average exchange rates for the period. All resulting foreign
\nexchange rate movements are recognised as a separate component of equity.
\nForeign exchange rate movements arising on the translation of non-monetary assets and
\nliabilities held in hyperinflationary subsidiaries are recognised in OCI. The amounts taken to the
\nCTA reserve represent the combined effect of restatement and translation and are expressed as
\na net change for the year.
\nOn consolidation, foreign exchange rate movements arising from the translation of the net
\ninvestment in foreign entities, and of borrowings and other currency instruments designated as
\nhedges of such investments, are taken to shareholders\u2019 equity. When a foreign operation is sold,
\nthe cumulative amount of such foreign exchange rate movements is recognised in the income
\nstatement as part of the gain or loss on sale.
\nForeign exchange rate movements arising on transactions are recognised in the income
\nstatement. Those arising on trading are taken to operating profit; those arising on borrowings are
\nclassified as finance income or cost.
\nREVENUE
\nRevenue is measured at the fair value of the consideration received, net of trade discounts
\n(including distributor rebates) and sales taxes. Revenue is discounted only where the impact of
\ndiscounting is material.
\nWhen the Group enters into complex contracts with multiple, separately identifiable components,
\nthe terms of the contract are reviewed to determine whether or not the elements of the contract
\nshould be accounted for separately. If a contract is being split into multiple components, the
\ncontract revenue is allocated to the different components at the start of the contract. The basis of
\nallocation depends on the substance of the contract. The Group considers relative stand-alone
\nselling prices, contractual prices and relative cost when allocating revenue.
\nThe Group has identified the following different types of revenue:
\n(i) Sale of goods recognised at a point in time \u2013 generic products manufactured by Smiths
\nGeneric products are defined as either:
\n\u2013
Products that are not specific to any particular customer;
\n\u2013
Products that may initially be specific to a customer but can be reconfigured at minimal cost,
\ni.e., retaining a margin, for sale to an alternative customer; or
\n\u2013
Products that are specific to a customer but are manufactured at Smiths risk, i.e., we have no
\nright to payment of costs plus margin if the customer refuses to take control of the goods.
\nFor established products with simple installation requirements, revenue is recognised when
\ncontrol of the product is passed to the customer. The point in time that control passes is defined in
\naccordance with the agreed shipping terms and is determined on a case-by-case basis. The time
\nof dispatch or delivery of the goods to the customer is normally the point at which invoicing
\noccurs. However for some generic products, revenue is recognised when the overall
\nperformance obligation has been completed, which is often after the customer has completed its
\nacceptance procedures and has assumed control.
\nProducts that are sold under multiple element arrangements, i.e., contracts involving a
\ncombination of products and services, are bundled into a single performance obligation
\nunless\u00a0the customer can benefit from the goods or services either on their own, or together with
\nother resources that are readily available to the customer and are distinct within the context of
\nthe contract.
\nFor contracts that pass control of the product to the customer only on completion of installation
\nservices, revenue is recognised upon completion of the installation.
\nAn obligation to replace or repair faulty products under the standard warranty terms is
\nrecognised as a provision. If the contract includes terms that either extend the warranty beyond
\nthe standard term or imply that maintenance is provided to keep the product working, these are
\nservice warranties and revenue is deferred to cover the performance obligation in an amount
\nequivalent to the stand-alone selling price of that service.
\n(ii) Sale of goods recognised over time \u2013 customer-specific products where the contractual
\nterms include rights to payment for work performed\u00a0to date
\nCustomer-specific products are defined as being:
\n\u2013
Products that cannot be reconfigured economically such that it remains profitable to sell to
\nanother customer;
\n\u2013
Products that cannot be sold to another customer due to contractual restrictions; and
\n\u2013
Products that allow Smiths to charge for the work performed to date in an amount that
\nrepresents the costs incurred to date plus a margin, should the customer refuse to take control
\nof the goods.
\nFor contracts that meet the terms listed above, revenue is recognised over the period that the
\nGroup is engaged in the manufacture of the product, calculated using the input method based on
\nthe amount of costs incurred to date compared to the overall costs of the contract. This is
\nconsidered to be a faithful depiction of the transfer of the goods to the customer as the costs
\nincurred, total expected costs and total order value are known. The time of dispatch or delivery of
\nthe goods to the customer is normally the point at which invoicing occurs.
\nAn obligation to provide a refund for faulty products under the standard warranty terms is
\nrecognised as a provision. If the contract includes terms that either extend the warranty beyond
\nthe standard term or imply that maintenance is provided to keep the product working, these are
\nservice warranties and revenue is deferred to cover the performance obligation in an amount
\nequivalent to the stand-alone selling price of that service.
\n(iii) Services recognised over time \u2013 services relating to the installation, repair and ongoing
\nmaintenance of equipment
\nServices include installation, commissioning, testing, training, software hosting and
\nmaintenance, product repairs and contracts undertaking extended warranty services.
\n
\n
\n
For complex installations where the supply of services cannot be separated from the supply of
\nproduct, revenue is recognised upon acceptance of the combined performance obligation (see
\nSale of goods (i) above).
\nFor services that can be accounted for as a separate performance obligation, revenue is
\nrecognised over time, assessed on the basis of the actual service provided as a proportion of the
\ntotal services to be provided.
\nDepending on the nature of the contract, revenue is recognised as follows:
\n\u2013
Installation, commissioning and testing services (when neither linked to the supply of product
\nnor subject to acceptance) are recognised rateably as the services are provided;
\n\u2013
Training services are recognised on completion of the training course;
\n\u2013
Software hosting and maintenance services are recognised rateably over the life of the
\ncontract;
\n\u2013
Product repair services, where the product is returned to Smiths premises for remedial action,
\nare recognised when the product is returned to the customer and they regain control of the
\nasset;
\n\u2013
Onsite ad hoc product repair services are recognised rateably as the services are performed;
\n\u2013
Long-term product repair and maintenance contracts are recognised rateably over the
\ncontract term; and
\n\u2013
Extended service warranties are recognised rateably over the contract term.
\nInvoicing for services depends on the nature of the service provided with some services charged
\nin advance and others in arrears.
\nWhere contracts are accounted for under the revenue recognised over time basis, the proportion
\nof costs incurred is used to determine the percentage of contract completion.
\nContracts for the construction of substantial assets, which normally last in excess of one year, are
\naccounted for under the revenue recognised over time basis, using an input method.
\nFor fixed-price contracts, revenue is recognised based upon an assessment of the amount of cost
\nincurred under the contract, compared to the total expected costs that will be incurred under the
\ncontract. This calculation is applied cumulatively with any over/under recognition being adjusted
\nin the current period.
\nFor cost-plus contracts, revenue is recognised based upon costs incurred to date plus any
\nagreed\u00a0margin.
\nFor both fixed-price and cost-plus contracts, invoicing is normally based on a schedule with
\nmilestone payments.
\nCONTRACT COSTS
\nThe Group has taken the practical expedient of not capitalising contract costs as they are
\nexpected to be expensed within one year from the date of signing.
\nLEASES
\nLease liabilities are initially measured at the present value of the future lease payments at the
\ncommencement date, discounted by using either the rate implicit in the lease, or if not observable,
\nthe Group\u2019s incremental borrowing rate. Lease payments comprise contractual lease payments;
\nvariable lease payments that depend on an index or rate, initially measured using the index or rate
\nat the commencement date; and the amount expected to be payable under residual value
\nguarantees.
\nRight of use assets are measured at commencement date at the amount of the corresponding
\nlease liability and initial direct costs incurred. Right of use assets are depreciated over the shorter
\nof the lease term and the useful life of the right of use assets, unless there is a transfer of
\nownership or purchase option which is reasonably certain to be exercised at the end of the lease
\nterm, in which case depreciation is charged over the useful life of the underlying asset. Right of
\nuse assets are subject to impairment.
\nWhen a lease contract is modified, either from a change to the duration of the lease or a change to
\namounts payable, the Group remeasures the lease liability by discounting the revised future lease
\npayments at a revised discount rate. A corresponding adjustment is made to the carrying value of
\nthe related right of use asset.
\nLeases of buildings typically have lease terms between one and seven years, while plant and
\nmachinery generally have lease terms between one and three years. The Group also has certain
\nleases of machinery with lease terms of 12 months or less and leases of office equipment with
\nlow value (typically below \u00a35,000). The Group applies the \u2018short-term lease\u2019 and \u2018lease of low-
\nvalue assets\u2019 recognition exemptions for these leases and recognises the lease payments
\nassociated with these leases as an expense on a straight-line basis over the lease term.
\nInterest on lease liabilities is presented as a financing activity in the Consolidated Cash-Flow
\nStatement, included under the heading lease payments.
\nTAXATION
\nThe charge for taxation is based on profits for the year and takes into account taxation deferred
\nbecause of temporary differences between the treatment of certain items for taxation and
\naccounting purposes.
\nCurrent income tax assets and liabilities are measured at the amount expected to be recovered
\nfrom or paid to taxation authorities. Tax benefits are not recognised unless it is likely that the tax
\npositions are sustainable. Tax positions taken are then reviewed to assess whether a provision
\nshould be made based on prevailing circumstances. Tax provisions are included in current tax
\nliabilities. The tax rates and tax laws used to compute the amount are those that are enacted or
\nsubstantively enacted, at the reporting date in the countries where the Group operates and
\ngenerates taxable income.
\nThe Group operates and is subject to taxation in many countries. Tax legislation is different in each
\ncountry, is often complex and is subject to interpretation by management and government
\nauthorities. These matters of judgement give rise to the need to create provisions for uncertain
\ntax positions which are recognised when it is considered more likely than not that there will be a
\nfuture outflow of funds to a taxing authority. Provisions are made against individual exposures
\n
\n
\n
and take into account the specific circumstances of each case, including the strength of technical
\narguments, recent case law decisions or rulings on similar issues and relevant external advice.
\nThe amounts are measured using one of the following methods, depending on which of the
\nmethods the Directors expect will better reflect the amount the Group will pay to the tax authority:
\n\u2013
The single best estimate method is used where there is a single outcome that is more likely
\nthan not to occur. This will happen, for example, where the tax outcome is binary or the range of
\npossible outcomes is very limited; or
\n\u2013
Alternatively, a probability weighted expected value is used where, on the balance of
\nprobabilities, there will be a payment to the tax authority but there are a number of possible
\noutcomes. In this case, a probability is assigned to each of the outcomes and the amount
\nprovided is the sum of these risk-weighted amounts. In assessing provisions against uncertain
\ntax positions, management uses in-house tax experts, professional firms and previous
\nexperience of the taxing authority to evaluate the risk.
\nDeferred tax is provided in full using the balance sheet liability method. A deferred tax asset is
\nrecognised where it is probable that future taxable income will be sufficient to utilise the available
\nrelief. Tax is charged or credited to the income statement except when it relates to items charged
\nor credited directly to equity, in which case the tax is also dealt with in equity.
\nDeferred tax is provided on temporary differences arising on investments in subsidiaries and
\nassociates, except where the timing of the reversal of the temporary differences is controlled by
\nthe Company and it is probable that the temporary difference will not reverse in the foreseeable
\nfuture. Deferred tax liabilities and assets are not discounted.
\nIAS 12\u00a0International Tax Reform: Pillar Two Model Rules.
\nOn 19th July 2023, the UK Endorsement Board adopted the Amendments to IAS 12\u00a0International
\nTax Reform: Pillar Two Model Rules, issued by the IASB in May 2023. The Amendments introduce
\na temporary mandatory exception from accounting for deferred taxes arising from the Pillar Two
\nmodel rules and the Group has applied this exception to recognising and disclosing information
\nabout deferred tax assets and liabilities related to Pillar Two income taxes.
\nEMPLOYEE BENEFITS
\nShare-based compensation
\nThe fair value of the shares or share options granted is recognised as an expense over the vesting
\nperiod to reflect the value of the employee services received. The fair value of options granted,
\nexcluding the impact of any non-market vesting conditions, is calculated using established option
\npricing models, principally binomial models. The probability of meeting non-market vesting
\nconditions, which include profitability targets, is used to estimate the number of share options
\nwhich are likely to vest.
\nFor cash-settled share-based payment, a liability is recognised based on the fair value of the
\npayment earned by the balance sheet date. For equity-settled share-based payment, the
\ncorresponding credit is recognised directly in reserves.
\nPension obligations and post-retirement benefits
\nPensions and similar benefits (principally healthcare) are accounted for under IAS 19. The
\nretirement benefit obligation in respect of the defined benefit plans is the liability (the present
\nvalue of all expected future obligations) less the fair value of the plan assets.
\nThe income statement expense is allocated between current service costs, reflecting the
\nincrease in liability due to any benefit accrued by employees in the current period, any past
\nservice costs/credits and settlement losses or gains which are recognised immediately, and the
\nscheme administration costs.
\nActuarial gains and losses are recognised in the statement of comprehensive income in the year
\nin which they arise. These comprise the impact on the liabilities of changes in demographic and
\nfinancial assumptions compared with the start of the year, actual experience being different to
\nassumptions and the return on plan assets being above or below the amount included in the net
\npension interest cost.
\nPayments to defined contribution schemes are charged as an income statement expense as they
\nfall due.
\nINTANGIBLE ASSETS
\nGoodwill
\nGoodwill represents the excess of the cost of an acquisition over the fair value of the Group\u2019s
\nshare of the identifiable net assets of the acquired subsidiary at the date of acquisition.
\nThe goodwill arising from acquisitions of subsidiaries after 1 August 1998 is included in intangible
\nassets, tested annually for impairment and carried at cost less accumulated impairment losses.
\nGains and losses on the disposal of an entity include the carrying amount of goodwill relating to
\nthe entity sold. The goodwill arising from acquisitions of subsidiaries before 1 August 1998 was
\nset against reserves in the year of acquisition.
\nGoodwill is tested for impairment at least annually. Should the test indicate that the net realisable
\nvalue of the CGU is less than current carrying value, an impairment loss will be recognised
\nimmediately in the income statement. Subsequent reversals of impairment losses for goodwill
\nare not recognised.
\nResearch and development
\nExpenditure on research and development is charged to the income statement in the year in
\nwhich it is incurred with the exception of:
\n\u2013
Amounts recoverable from third parties; and
\n\u2013
Expenditure incurred in respect of the development of major new products where the outcome
\nof those projects is assessed as being reasonably certain as regards viability and technical
\nfeasibility. Such expenditure is capitalised and amortised over the estimated period of sale
\nfor each product, commencing in the year that the product is ready for sale. Amortisation is
\ncharged straight line\u00a0or based on the units produced, depending on the nature of the product
\nand the availability of reliable estimates of\u00a0production\u00a0volumes.
\n
\n
\n
The cost of development projects which are expected to take a substantial period of time to
\ncomplete includes attributable borrowing\u00a0costs.
\nIntangible assets acquired in business combinations
\nThe identifiable net assets acquired as a result of a business combination may include intangible
\nassets other than goodwill. Any such intangible assets are amortised straight line over their
\nexpected useful lives as follows:
\nPatents, licences and trademarks
up to 20 years
\nTechnology
up to 13 years
\nCustomer relationships
up to 15 years
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
\nSoftware, patents and intellectual property
\nThe estimated useful lives are as follows:
\nSoftware
up to seven years
\nPatents and intellectual property
\nshorter of the economic life and the period the right is
\nlegally enforceable
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
\nPROPERTY, PLANT AND EQUIPMENT
\nProperty, plant and equipment are stated at historical cost less accumulated depreciation and
\nany recognised impairment losses.
\nLand is not depreciated. Depreciation is provided on other assets estimated to write off the
\ndepreciable amount of relevant assets by equal annual instalments over their estimated useful
\nlives. In general, the rates used are:
\nFreehold and long leasehold buildings
2% per annum
\nShort leasehold property
over the period of the lease
\nPlant, machinery, etc.
10% to 20% per annum
\nFixtures, fittings, tools and other equipment
10% to\u00a033% per annum
\nThe cost of any assets which are expected to take a substantial period of time to complete
\nincludes attributable borrowing costs.
\nThe assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at each
\nbalance sheet date. An asset\u2019s carrying amount is written down immediately to its recoverable
\namount if the asset\u2019s carrying amount is greater than its estimated recoverable\u00a0amount.
\nINVENTORIES
\nInventories are stated at the lower of cost and net realisable value. Cost is determined using the
\nfirst-in, first-out method. The cost of finished goods and work in progress comprises raw
\nmaterials, direct labour, other direct costs and related production overheads (based on normal
\noperating capacity). The cost of items of inventory which take a substantial period of time to
\ncomplete includes attributable borrowing costs.
\nThe net realisable value of inventories is the estimated selling price in the ordinary course of
\nbusiness, less applicable variable selling expenses. Provisions are made for any slow-moving,
\nobsolete or defective inventories.
\nTRADE AND OTHER RECEIVABLES
\nTrade receivables and contract assets are either classified as \u2018held to collect\u2019 and initially
\nrecognised at fair value and subsequently measured at amortised cost, less any appropriate
\nprovision for expected credit losses or as \u2018held to collect and sell\u2019 and measured at fair value
\nthrough other comprehensive income (FVOCI).
\nA provision for expected credit losses is established when there is objective evidence that it will
\nnot be possible to collect all amounts due according to the original payment terms. Expected
\ncredit losses are determined using historical write-offs as a basis, adjusted for factors that are
\nspecific to the debtor, general economic conditions of the industry in which the debtor operates
\nand with a default risk multiplier applied to reflect country risk premium. The Group applies the
\nIFRS 9 simplified lifetime expected credit loss approach for trade receivables and contract assets
\nwhich do not contain a significant financing component
\nPROVISIONS
\nProvisions are recognised when the Group has a present obligation (legal or constructive) as a
\nresult of a past event, it is probable that an outflow of resources embodying economic benefits
\nwill be required to settle the obligation, and a reliable estimate can be made of the amount of the
\nobligation. Where the Group expects some or all of a provision to be reimbursed, for example
\nunder an insurance contract, the reimbursement is recognised as a separate asset but only when
\nthe reimbursement is virtually certain.
\nProvisions for warranties and product liability, disposal indemnities, restructuring costs, property
\ndilapidations and legal claims are recognised when: the Company has a legal or constructive
\nobligation as a result of a past event; it is probable that an outflow of resources will be required to
\nsettle the obligation; and the amount has been reliably estimated. Provisions are not recognised
\nfor future operating losses.
\nProvisions are discounted where the time value of money is material.
\nWhere there is a number of similar obligations, for example where a warranty has been given, the
\nlikelihood that an outflow will be required in settlement is determined by considering the class of
\nobligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
\nto any one item included in the same class of obligations may be small.
\nDISCONTINUED OPERATIONS
\nA discontinued operation is either:
\n\u2013
A component of the Group\u2019s business that represents a separate major line of business or
\ngeographical area of operations that has been disposed of, has been abandoned or meets the
\ncriteria to be classified as held for sale; or
\n\u2013
A business acquired solely for the purpose of selling it.
\n
\n
\n
Discontinued operations are presented on the income statement as\u00a0a\u00a0separate line and are
\nshown net of tax.
\nIn accordance with IAS 21, gains and losses on intra-group monetary assets and liabilities are not
\neliminated. Therefore foreign exchange rate movements on intercompany loans with discontinued
\noperations are presented on the income statement as non-headline finance cost items.
\nCASH AND CASH EQUIVALENTS
\nCash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing
\nsecurities with maturities of three months or less.
\nIn the cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which
\nare included as current borrowings in liabilities on the balance sheet.
\nFINANCIAL ASSETS
\nThe classification of financial assets depends on the purpose for which the assets were acquired.
\nManagement determines the classification of an asset at initial recognition and re-evaluates the
\ndesignation at each reporting date. Financial assets are classified as: measured at amortised
\ncost, fair value through other comprehensive income or fair value through profit and loss.
\nFinancial assets primarily include trade receivables, cash and cash equivalents (comprising cash
\nat bank, money-market funds, and short-term deposits), short-term investments, derivatives
\n(foreign exchange contracts and interest rate derivatives) and unlisted investments.
\n\u2013
Trade receivables are classified either as \u2018held to collect\u2019 and measured at amortised cost or
\nas \u2018held to collect and sell\u2019 and measured at fair value through other comprehensive income
\n(FVOCI). The Group may sell trade receivables due from certain customers before the due date.
\nAny trade receivables from such customers that are not sold at the reporting date are classified
\nas \u2018held to collect and sell\u2019.
\n\u2013
Cash and cash equivalents (consisting of balances with banks and other financial institutions,
\nmoney-market funds and short-term deposits) and short-term investments are subject to low
\nmarket risk. Cash balances, short-term deposits and short-term investments are measured at
\namortised cost. Money market funds are measured at fair value through profit and loss (FVPL).
\n\u2013
Derivatives are measured at FVPL.
\n\u2013
Listed and unlisted investments are measured at FVOCI.
\n\u2013
Deferred contingent consideration are measured at FVPL.
\nFinancial assets are derecognised when the right to receive cash-flows from the assets has
\nexpired, or has been transferred, and the Group has transferred substantially all of the risks and
\nrewards of ownership.
\nOn initial recognition, the Group may make an irrevocable election to designate certain
\ninvestments as FVOCI, if they are not held for trading or relate to contingent consideration on a
\nbusiness combination. When securities measured at FVOCI are sold or impaired, the
\naccumulated fair value adjustments remain in reserves.
\nFinancial assets are classified as current if they are expected to be realised within 12 months of
\nthe balance sheet date.
\nFINANCIAL LIABILITIES
\nBorrowings are initially recognised at the fair value of the proceeds, net of related transaction
\ncosts. These transaction costs, and any discount or premium on issue, are subsequently
\namortised under the effective interest rate method through the income statement as interest over
\nthe life of the loan and added to the liability disclosed in the balance sheet. Related accrued
\ninterest is included in the borrowings figure.
\nBorrowings are classified as current liabilities unless the Group has an unconditional right to
\ndefer settlement of the liability for at least one year after the balance sheet date.
\nDERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
\nThe Group uses derivative financial instruments to hedge its exposures to foreign exchange and
\ninterest rates arising from its operating and financing activities.
\nDerivative financial instruments are initially recognised at fair value on the date a derivative
\ncontract is entered into and are subsequently re-measured at their fair value. The method of
\nrecognising any resulting gain or loss depends on whether the derivative financial instrument is
\ndesignated as a hedging instrument and, if so, the nature of the item being hedged.
\nWhere derivative financial instruments are designated into hedging relationships, the Group
\nformally documents the following:
\n\u2013
The risk management objective and strategy for entering the hedge;
\n\u2013
The nature of the risks being hedged and the economic relationship between the hedged item
\nand the hedging instrument; and
\n\u2013
Whether the change in cash-flows of the hedged item and hedging instrument are expected to
\noffset each other.
\nChanges in the fair value of any derivative financial instruments that do not qualify for hedge
\naccounting are recognised immediately in the income statement.
\nFair value hedge
\nThe Group uses derivative financial instruments to convert part of its fixed rate debt to floating
\nrate in order to hedge the risks arising from its external borrowings.
\nThe Group designates these as fair value hedges of interest rate risk. Changes in the hedging
\ninstrument are recorded in the income statement, together with any changes in the fair values of
\nthe hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge
\nis effective. Gains or losses relating to any ineffectiveness are immediately recognised in the
\nincome statement.
\n
\n
\n
Cash-flow hedge
\nCash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
\nThe effective portions of changes in the fair values of derivatives that are designated and qualify as
\ncash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. Amounts accumulated in the hedge reserve are
\nrecycled in the income statement in the periods when the hedged items will affect profit or loss (for
\nexample, when the forecast sale that is hedged takes place).
\nIf a forecast transaction that is hedged results in the recognition of a non-financial asset (for
\nexample, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are
\ntransferred from the reserve and included in the initial measurement of the cost of the asset or
\nliability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
\nfor hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains
\nin the reserve and is recognised when the forecast transaction is ultimately recognised in the
\nincome statement.
\nWhen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
\nreported in other comprehensive income is immediately transferred to the income statement.
\nNet investment hedge
\nHedges of net investments in foreign operations are accounted for similarly to cash-flow hedges.
\nAny gain or loss on the hedging instrument relating to the effective portion of the hedge is
\nrecognised in other comprehensive income; the gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. When a foreign operation is disposed of, gains
\nand losses accumulated in equity related to that operation are included in the income statement
\nfor that period.
\nFAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
\nThe fair values of financial assets and financial liabilities are the amounts at which the instrument
\ncould be exchanged in a current transaction between willing parties, other than in a forced or
\nliquidation sale.
\nIFRS 13: \u2018Fair value measurement\u2019 requires fair value measurements to be classified according to
\nthe following hierarchy:
\n\u2013
Level 1 \u2013 quoted prices in active markets for identical assets or liabilities;
\n\u2013
Level 2 \u2013 valuations in which all inputs are observable either directly (i.e., as prices) or indirectly
\n(i.e., derived from prices); and
\n\u2013
Level 3 \u2013 valuations in which one or more inputs that are significant to the resulting value are
\nnot based on observable market data.
\nSee note 21 for information on the methods which the Group uses to estimate the fair values of its
\nfinancial instruments.
\nDIVIDENDS
\nDividends are recognised as a liability in the period in which they are authorised. The interim
\ndividend is recognised when it is paid and the final dividend is recognised when it has been
\napproved by shareholders at the Annual General Meeting.
\nNEW ACCOUNTING STANDARDS EFFECTIVE 2023
\nNo new accounting standards have been adopted in the financial year. The accounting policies
\nadopted in the preparation of these consolidated financial statements are consistent with those
\nfollowed in the previous financial year.
\nNEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
\nNo other new standards, new interpretations or amendments to standards or interpretations have
\nbeen published which are expected to have a significant impact on the Group\u2019s financial
\nstatements.
\nPARENT COMPANY
\nThe ultimate Parent Company of the Group is Smiths Group plc, a company incorporated in
\nEngland and Wales and listed on the London Stock Exchange.
\nThe accounts of the Parent Company, Smiths Group plc, have been prepared in accordance with
\nthe Companies Act 2006 and Financial Reporting Standard 101, \u2018Reduced Disclosure Framework\u2019.
\nThe Company accounts are presented in separate financial statements on pages 197 to 204. The
\nprincipal subsidiaries of the Parent Company are listed in the above accounts.
\n
\n
\n
1. SEGMENT INFORMATION
\nANALYSIS BY OPERATING SEGMENT
\nThe Group is organised into four divisions: John Crane; Smiths Detection; Flex-Tek; and Smiths
\nInterconnect. These divisions design, manufacture and support the following products:
\n\u2013
John Crane
\u2013 mechanical seals, seal support systems, power transmission couplings and
\nspecialised filtration systems;
\n\u2013
Smiths Detection
\u2013 sensors and systems that detect and identify explosives, narcotics,
\nweapons, chemical agents, biohazards and contraband;
\n\u2013
Flex-Tek
\u2013 engineered components, flexible hosing and rigid tubing that heat and move fluids
\nand gases; and
\n\u2013
Smiths Interconnect
\u2013 specialised electronic and radio frequency board-level and waveguide
\ndevices, connectors, cables, test sockets and sub-systems used in high-speed, high-reliability,
\nsecure connectivity applications.
\nThe position and performance of each division are reported at each Board meeting to the Board of
\nDirectors. This information is prepared using the same accounting policies as the consolidated
\nfinancial information except that the Group uses headline operating profit to monitor the divisional
\nresults and operating assets to monitor the divisional position. See note 3 and note 29 for an
\nexplanation of which items are excluded from headline measures.
\nIntersegment sales and transfers are charged at arm\u2019s length prices.
\nSEGMENT TRADING PERFORMANCE
\nYear ended 31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
1,079
803
768
387
\u2013
3,037
\nDivisional headline operating
\nprofit
244
90
149
62
\u2013
545
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(44)
(44)
\nHeadline operating profit/(loss)
244
90
149
62
(44)
501
\nItems excluded from headline
\nmeasures (note 3)
(27)
(35)
(18)
(12)
(6)
(98)
\nOperating profit/(loss)
217
55
131
50
(50)
403
\nHeadline operating margin
22.6%
11.2%
19.4%
16.0%
16.5%
\nYear ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
901
655
647
363
\u2013
2,566
\nDivisional headline operating
\nprofit
188
73
133
65
\u2013
459
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(42)
(42)
\nHeadline operating profit/(loss)
188
73
133
65
(42)
417
\nItems excluded from headline
\nmeasures (note 3)
(21)
(37)
(27)
(1)
(214)
(300)
\nOperating profit/(loss)
167
36
106
64
(256)
117
\nHeadline operating margin
20.9%
11.1%
20.6%
18.0%
16.3%
\nOperating profit is stated after charging (crediting) the following items:
\nYear ended 31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
17
10
8
6
1
42
\nDepreciation \u2013 right of use assets
15
7
6
3
1
32
\nAmortisation of capitalised
\ndevelopment costs
\u2013
2
\u2013
\u2013
\u2013
2
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
52
52
\nShare-based payment
3
1
2
2
6
14
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(10)
(10)
\n
\n
\n
Year ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
15
10
7
5
1
38
\nDepreciation \u2013 right of use assets
15
7
5
2
1
30
\nAmortisation of capitalised
\ndevelopment costs
\u2013
3
\u2013
\u2013
\u2013
3
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
51
51
\nShare-based payment
3
2
2
1
4
12
\nRussia impairment charges and
\nrelated closure costs
9
10
\u2013
\u2013
\u2013
19
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(7)
(7)
\nThe corporate and non-headline column comprises central information technology, human
\nresources and headquarters costs and non-headline expenses (see note 3).
\nSEGMENT ASSETS AND LIABILITIES
\nSegment assets
\n31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nProperty, plant, equipment,
\nright of use assets, development
\nprojects, other intangibles and
\ninvestments
162
142
84
66
375
829
\nInventory, trade and other
\nreceivables
489
599
226
160
10
1,484
\nSegment assets
651
741
310
226
385
2,313
\n31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nProperty, plant, equipment,
\nright of use assets, development
\nprojects, other intangibles and
\ninvestments
167
127
84
54
399
831
\nInventory, trade and other
\nreceivables
429
524
244
167
13
1,377
\nSegment assets
596
651
328
221
412
2,208
\nNon-headline assets comprise receivables relating to non-headline items, acquisitions
\nand\u00a0disposals.
\nSegment liabilities
\n31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDivisional liabilities
200
357
91
62
\u2013
710
\nCorporate and non-headline
\nliabilities
\u2013
\u2013
\u2013
\u2013
339
339
\nSegment liabilities
200
357
91
62
339
1,049
\n31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDivisional liabilities
(155)
(347)
(91)
(85)
\u2013
(678)
\nCorporate and non-headline
\nliabilities
\u2013
\u2013
\u2013
\u2013
(385)
(385)
\nSegment liabilities
(155)
(347)
(91)
(85)
(385)
(1,063)
\nNon-headline liabilities comprise provisions and accruals relating to non-headline items,
\nacquisitions and disposals.
\nReconciliation of segment assets and liabilities to statutory assets and liabilities
\nAssets
Liabilities
\n31 July
\n2023
\n\u00a3m
\n31 July
\n2022
\n\u00a3m
\n31 July
\n2023
\n\u00a3m
\n31 July
\n2022
\n\u00a3m
\nSegment assets and liabilities
2,313
2,208
(1,049)
(1,063)
\nGoodwill and acquired intangibles
1,415
1,501
\u2013
\u2013
\nDerivatives
5
4
(20)
(47)
\nCurrent and deferred tax
142
145
(120)
(111)
\nRetirement benefit assets and obligations
195
309
(106)
(115)
\nCash and borrowings
285
1,056
(654)
(1,166)
\nStatutory assets and liabilities
4,355
5,223
(1,949)
(2,502)
\n
\n
Segment capital expenditure
\nThe capital expenditure on property, plant and equipment, capitalised development and other
\nintangible assets for each division is:
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nCapital expenditure year ended
\n31\u00a0July 2023
19
36
10
16
\u2013
81
\nCapital expenditure year ended
\n31\u00a0July 2022
24
23
11
12
1
71
\nSegment capital employed
\nCapital employed is a non-statutory measure of invested resources. It comprises statutory net
\nassets adjusted to add goodwill recognised directly in reserves in respect of subsidiaries acquired
\nbefore 1 August 1998 of \u00a3478m (FY2022: \u00a3478m) and eliminate retirement benefit assets and
\nobligations and litigation provisions relating to non-headline items, both net of related tax, and net
\ndebt. See note 29 for a reconciliation of net assets to capital employed.
\nThe 12-month rolling average capital employed by division, which Smiths uses to calculate
\ndivisional return on capital employed, is:
\n31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nTotal
\n\u00a3m
\nAverage divisional capital employed
1,022
1,154
570
466
3,212
\nAverage corporate capital employed
(16)
\nAverage total capital employed \u2013 continuing
\noperations
3,196
\n31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nTotal
\n\u00a3m
\nAverage divisional capital employed
970
1,019
520
400
2,909
\nAverage corporate capital employed
31
\nAverage total capital employed \u2013 continuing
\noperations
2,940
\nANALYSIS OF REVENUE
\nThe revenue for the main product and service lines for each division is:
\nJohn Crane
\nOriginal
\nequipment
\n\u00a3m
\nAftermarket
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
314
765
1,079
\nRevenue year ended 31 July 2022
279
622
901
\nSmiths Detection
\nAviation
\n\u00a3m
\nOther security
\nsystems
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
535
268
803
\nRevenue year ended 31 July 2022
467
188
655
\nFlex-Tek
\nAerospace
\n\u00a3m
\nIndustrials
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
144
624
768
\nRevenue year ended 31 July 2022
116
531
647
\nSmiths Interconnect
\nComponents,
\nconnectors &
\nsubsystems
\n\u00a3m
\nRevenue year ended 31 July 2023
387
\nRevenue year ended 31 July 2022
363
\nAftermarket sales contributed \u00a31,545m (FY2022: \u00a31,238m) of Group revenue: John Crane
\naftermarket sales were \u00a3765m (FY2022: \u00a3622m); Smiths Detection aftermarket sales were \u00a3413m
\n(FY2022: \u00a3355m); Flex-Tek aftermarket sales were \u00a3367m (FY2022: \u00a3261m); and Smiths
\nInterconnect aftermarket sales were \u00a3nil (FY2022: \u00a3nil).
\n
\n
Divisional revenue is analysed by the Smiths Group key global markets as follows:
\nGeneral
\nIndustrial
\n\u00a3m
\nSafety &
\nSecurity
\n\u00a3m
\nEnergy
\n\u00a3m
\nAerospace
\n\u00a3m
\nTotal
\n\u00a3m
\nJohn Crane
\nRevenue year ended 31 July 2023
423
\u2013
656
\u2013
1,079
\nRevenue year ended 31 July 2022
371
\u2013
530
\u2013
901
\nSmiths Detection
\nRevenue year ended 31 July 2023
\u2013
803
\u2013
\u2013
803
\nRevenue year ended 31 July 2022
\u2013
655
\u2013
\u2013
655
\nFlex Tek
\nRevenue year ended 31 July 2023
624
\u2013
\u2013
144
768
\nRevenue year ended 31 July 2022
531
\u2013
\u2013
116
647
\nSmiths Interconnect
\nRevenue year ended 31 July 2023
190
141
\u2013
56
387
\nRevenue year ended 31 July 2022
166
144
\u2013
53
363
\nTotal
\nRevenue year ended 31 July 2023
1,237
944
656
200
3,037
\nRevenue year ended 31 July 2022
1,068
799
530
169
2,566
\nThe Group\u2019s statutory revenue is analysed as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nSale of goods recognised at a point in time
2,244
1,849
\nSale of goods recognised over time
36
99
\nServices recognised over time
757
618
\n3,037
2,566
\nANALYSIS BY GEOGRAPHICAL AREAS
\nThe Group\u2019s revenue by destination and non-current operating assets by location are shown below:
\nRevenue
\nIntangible assets, right of use
\nassets and property, plant\u00a0and
\nequipment
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nAmericas
1,641
1,423
1,254
1,324
\nEurope
563
480
519
498
\nAsia Pacific
493
421
71
76
\nRest of World
340
242
29
39
\n3,037
2,566
1,873
1,937
\nRevenue by destination attributable to the United Kingdom was \u00a387m (FY2022: \u00a375m). Other
\nrevenue found to be significant included, the United States of America, totalling \u00a31,383m (FY2022:
\n\u00a31,206m), China (excluding Hong Kong) \u00a3150m (FY2022: \u00a3132m) and Germany \u00a3143m (FY2022:
\n\u00a3123m). Revenue by destination has been selected as the basis for attributing revenue to
\ngeographical areas as this was the geographic attribution of revenue used by management to
\nreview business performance.
\nNon-current assets located in the United Kingdom total \u00a3123m (FY2022: \u00a3108m). Significant
\nnon-current assets held in the United States of America \u00a31,181m (FY2022: \u00a31,260m) and Germany
\n\u00a3345m (FY2022: \u00a3340m).
\n2. OPERATING COSTS
\nThe Group\u2019s operating costs for continuing operations are analysed as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nCost of sales \u2013 direct materials,
\nlabour, production and
\ndistribution overheads
1,919
\u2013
1,919
1,605
\u2013
1,605
\nSelling costs
221
\u2013
221
200
\u2013
200
\nAdministrative expenses
406
98
504
351
300
651
\nTransition services cost
\nreimbursement
(10)
\u2013
(10)
(7)
\u2013
(7)
\nTotal
2,536
98
2,634
2,149
300
2,449
\nFollowing the sale of the Smiths Medical business, the Group has provided transition services to
\nthe Smiths Medical Group, which is disclosed above as transition services cost reimbursement.
\nOPERATING PROFIT IS STATED AFTER CHARGING (CREDITING):
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nResearch and development expense
73
80
\nDepreciation of property, plant and equipment
42
38
\nDepreciation of right of use assets
32
30
\nAmortisation of intangible assets
61
61
\nRussia impairment and related closure costs
\u2013
19
\nTransition services cost reimbursement
(10)
(7)
\nResearch and development (R&D) cash costs were \u00a3113m (FY2022: \u00a3107m) comprising \u00a373m
\n(FY2022: \u00a380m) of R&D expensed to the income statement, \u00a321m (FY2022: \u00a312m) of capitalised
\ncosts and \u00a319m (FY2022: \u00a315m) of customer funded R&D.
\nAdministrative expenses include \u00a32m (FY2022: \u00a33m) in respect of lease payments for short-term
\nand low-value leases which were not included within right of use assets and lease liabilities.
\n
\n
AUDITORS\u2019 REMUNERATION
\nThe following fees were paid or are payable to the Company\u2019s auditors, KPMG LLP and other
\nfirms in the KPMG network, for the year ended 31 July 2023.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n(represented)
\n\u00a3m
\nAudit services
\nFees payable to the Company\u2019s auditors for the audit of the Company\u2019s
\nannual financial statements
2.6
3.0
\nFees payable to the Company\u2019s auditors and its associates for other
\nservices:
\n\u2013 the audit of the Company\u2019s subsidiaries
5.5
4.7
\n8.1
7.7
\nAll other services
0.5
0.8
\nOther services comprise audit-related assurance services of \u00a30.5m (FY2022: \u00a30.5m) and fees for
\nreporting accountant services in connection with a class 1 disposal of \u00a3nil (FY2022: \u00a30.3m).
\nAudit-related assurance services include the review of the Interim Report and the limited
\nassurance of the Group\u2019s Scope 1-3 Greenhouse Gas emissions metrics. Total fees for non-audit
\nservices comprise 6% (FY2022: 10%) of audit fees.
\nIn the current year, the Group has agreed \u00a30.3m of additional fees with the Group auditors relating
\nto the audit of the prior year financial statements.
\n3. NON-STATUTORY PROFIT MEASURES
\nHEADLINE PROFIT MEASURES
\nThe Group has identified and defined a \u2018headline\u2019 measure of performance which is not impacted
\nby material non-recurring items or items considered non-operational/trading in nature. This non-
\nGAAP measure of profit is not intended to be a substitute for any IFRS measures of performance,
\nbut is a key measure used by management to understand and manage performance. See the
\ndisclosures on presentation of results in accounting policies for an explanation of the
\nadjustments. The items excluded from \u2018headline\u2019 are referred to as \u2018non-headline\u2019 items.
\nNON-HEADLINE OPERATING PROFIT ITEMS
\nI. CONTINUING OPERATIONS
\nThe non-headline items included in statutory operating profit for continuing operations were
\nas\u00a0follows:
\nNotes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nPost-acquisition integration costs and fair value
\nadjustment unwind
\nFair value loss on contingent consideration
(6)
\u2013
\nUnwind of acquisition balance sheet fair value uplift
\u2013
(2)
\nAcquisition and disposal related transaction costs and
\nprovision releases
\nBusiness acquisition/disposal costs
(1)
(5)
\nLegacy pension scheme arrangements
\nPast service credit/(costs) for benefit equalisation and
\nimprovements
8
4
(43)
\nScheme administration costs
8
(2)
\nRetirement benefit scheme settlement loss
8
(1)
(171)
\nNon-headline litigation provision movements
\nMovement in provision held against Titeflex Corporation
\nsubrogation claims
23
7
(2)
\nProvision for John Crane, Inc. asbestos litigation
23
(16)
(7)
\nCost recovery for John Crane, Inc. asbestos litigation
7
\u2013
\nOther items
\nAmortisation of acquired intangible assets
10
(52)
(51)
\nRestructuring costs
(36)
\u2013
\nIrrecoverable VAT on chain export transaction
(2)
\u2013
\nRussia impairment charges and related closure costs
11
\u2013
(19)
\nNon-headline items in operating profit \u2013 continuing
\noperations
(98)
(300)
\nPost-acquisition integration costs and fair value adjustment unwind
\nFollowing the sale of Smiths Medical to ICU Medical, Inc. (ICU) in FY2022, the Group holds a
\nfinancial asset for the fair value of US$100m additional sales consideration that is contingent on
\nthe future share price performance of ICU. In FY2023 a fair value loss of \u00a36m has been
\nrecognised on this financial asset. This is considered to be a non-headline item on the basis that
\nthese charges result from acquisition accounting and do not relate to current trading activity.
\nThe impact of unwinding the acquisition balance sheet fair value adjustments required by IFRS 3
\n\u2018Business combinations\u2019 has been recognised as non-headline as the charges do not relate to
\ntrading activity. The \u00a32m charged in the prior period was due to the unwind of fair value uplifts on
\nthe acquisition of Royal Metal Products.
\n
\n
Acquisition and disposal related transaction costs and provision releases
\nThe \u00a31m (FY2022: \u00a35m) business acquisition/disposal costs represented incremental transaction
\ncosts including the acquisition of Plastronics in FY2023. These costs did not include the cost of
\nemployees working on transactions and were reported as non-headline because they are
\ndependent on the level of acquisition and disposal activity in the year.
\nLegacy pension scheme arrangements
\nThe past service credit/(costs) comprises the following:
\n\u2013
A net credit of \u00a34m (FY2022: \u00a319m debit) has been recognised in respect of equalisation
\ncharges of retirement benefits for men and women. The net credit comprises a further liability
\nof \u00a312m and the release of \u00a316m, recognised in previous years, following the identification of
\nadditional evidence of the obligation for equalisation (see note 8 for further details); and
\n\u2013
In the prior year \u00a324m of costs were recognised following the TI Group Pension Scheme
\n(TIGPS) executing an insurance buy-in policy.
\nThese past service credits/(costs) are reported as non-headline as they are non-recurring and
\nrelate to legacy pension liabilities.
\nScheme administration costs of \u00a32m (FY2022: \u00a3nil) relate to the TIGPS legacy pension scheme.
\nAs the Group has no expectation of receiving a refund from the scheme, an economic benefit
\nvalue of zero has been placed on the TIGPS surplus. These are non-headline charges as the
\nSmiths Group effectively has no economic exposure to these costs and they are paid from cash
\nretained in the scheme.
\nSettlement losses of \u00a31m (31 July 2022: \u00a3171m) on post-retirement benefit schemes relate to
\nsettlement arrangements made between the Group and former employees of the now disposed
\nof\u00a0Medical business. The prior year losses arose primarily on the buy-in of the TIGPS scheme.
\nThese items are considered non-headline as they are non-recurring and relate to legacy
\npension\u00a0schemes.
\nNon-headline litigation provision movements
\nThe following litigation costs and recoveries have been treated as non-headline items because
\nthe provisions were treated as non-headline when originally recognised and the subrogation
\nclaims and litigation relate to products that the Group no longer sells in these markets:
\n\u2013
The \u00a37m credit (FY2022: \u00a32m charge) recognised by Titeflex Corporation was principally driven
\nby discount rate movements and a reduction in the expected costs to settle future claims. See
\nnote 23 for further details; and
\n\u2013
The \u00a316m charge (FY2022: \u00a37m) in respect of John Crane, Inc. asbestos litigation is principally
\ndue to litigation costs of \u00a331m offset by \u00a315m of discount rate movements following an increase
\nin US treasury bond yields. See note 23 for further details; and
\n\u2013
In FY23 \u00a37m (FY2022: \u00a3nil) of asbestos litigation costs were recovered by John Crane, Inc. via
\ninsurer settlements.
\nOther items
\nAcquisition related intangible asset amortisation costs of \u00a352m (FY2022: \u00a351m) were recognised
\nin the current period. This is considered to be a non-headline item on the basis that these charges
\nresult from acquisition accounting and do not relate to current trading activity.
\nAs announced in the FY2022 Annual Report, during FY2023 the Group has completed a
\nrestructuring project across the Group to better serve our customers, maximise growth
\nopportunities and improve efficiency. In FY2023 \u00a336m of non-headline charges have been
\nexpensed of which \u00a326m has been paid to date, the remainder is forecast to be paid within the
\nnext 18 months. The restructuring project is a non-headline expense as the costs are material,
\nnon-recurring and part of a pre-approved programme.
\nThe \u00a32m of irrecoverable VAT (31 July 2022: \u00a3nil) relates to a historical VAT classification error.
\nThis error had resulted in certain intercompany chain export transactions being treated as VAT
\nexempt when they should have been initially classified as subject to European VAT. This has been
\ntreated as non-headline as it relates to six years of past VAT practice and will involve payment and
\nrecovery of European VAT, which spans FY2023 and FY2024, so may have a material impact on the
\nGroup\u2019s headline cash conversion metric.
\nIn the prior year a \u00a319m charge has been recognised in relation to Russia impairment charges
\nand related closure costs.
\nNON-HEADLINE FINANCE COSTS ITEMS
\nThe non-headline items included in finance costs for continuing operations were as follows:
\nNotes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nUnwind of discount on provisions
23
(7)
(3)
\nOther finance income \u2013 retirement benefits
8
7
7
\nInterest payable on overdue VAT
(7)
\u2013
\nOther sundry financing losses
(1)
\u2013
\nFair value gain on investment in early stage business
14
\u2013
1
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
\u2013
22
\nNon-headline items in finance costs \u2013 continuing
\noperations
(8)
27
\nContinuing operations \u2013 non-headline loss before
\ntaxation
(106)
(273)
\nThe financing elements of non-headline legacy liabilities, including the \u00a37m (FY2022: \u00a33m)
\nunwind of discount on provisions, were excluded from headline finance costs because these
\nprovisions were originally recognised as non-headline and this treatment has been maintained
\nfor ongoing costs and credits.
\nOther finance income comprises \u00a37m (FY2022: \u00a37m) of financing credits relating to retirement
\nbenefits. These were excluded from headline finance costs because the ongoing costs and credits
\nare a legacy of previous employee pension arrangements.
\n
\n
The \u00a37m of interest payable on overdue VAT (FY2022: \u00a3nil) relates to a historic VAT classification
\nerror. This was excluded from headline finance costs because the underlying issue was
\nrecognised as non-headline and this treatment has been maintained for ongoing costs
\nand\u00a0credits.
\nNON-HEADLINE TAXATION (CHARGE)/CREDIT
\nThe non-headline items included in taxation for continuing operations were as follows:
\nNotes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nTax credit on non-headline loss
6
18
19
\nIncrease in unrecognised UK deferred tax asset
6
(31)
(5)
\nNon-headline taxation (charge)/credit\u2013 continuing
\noperations
(13)
14
\nContinuing operations \u2013 non-headline loss for the year
(119)
(259)
\nMovement in unrecognised UK deferred tax asset
\nThese movements are reported as non-headline because the original credit, related to non-
\nheadline charges was reported as non-headline.
\nII. DISCONTINUED OPERATIONS
\nThe non-headline items for discontinued operations were as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nNon-headline operating profit items
\nMedfusion documentation remediation costs
\u2013
(33)
\nImpairment of investment in Ivenix, Inc. convertible debt
\u2013
(14)
\nNon-headline finance costs items
\nForeign exchange loss on intercompany loan with parent
\u2013
(22)
\nGain on sale of discontinued operation
\nGain on the sale of Smiths Medical to ICU Medical, Inc.
6
1,036
\nNon-headline taxation items
\nTax on non-headline loss
\u2013
6
\nNon-headline items in profit from discontinued
\noperations
6
973
\nProfit for the year \u2013 non-headline items for continuing
\nand discontinued operations
(113)
714
\nIn the current year the Group has recognised an additional \u00a36m gain on transactions related to
\nthe sale of Smiths Medical. An \u00a311m credit was released in respect of disposal and restructuring
\nprovisions, that are no longer required, and an offsetting additional \u00a35m of provisions were
\ncharged in respect of potential indemnity, litigation and arbitration costs. These items are
\nconsidered to be non-headline as they relate to discontinued former business activities.
\nIn the prior period:
\n\u2013
Smiths Medical recognised a \u00a333m provision against the costs of the remediation actions
\nrequired to address each of the observations and discussion items contained in the US Food
\nand Drug Administration \u2018for-cause\u2019 audit findings on the Medfusion product range; and
\n\u2013
The decision by Smiths Medical to exit its commercial agreement with Ivenix, Inc. triggered an
\nindicator of impairment to the carrying value of the Smiths Medical investment in Ivenix, Inc.
\nand management impaired the entire \u00a314m value of Smiths Medical\u2019s investment; and
\n\u2013
The \u00a322m foreign exchange loss on intercompany loan with parent directly offsets the foreign
\nexchange gain in continuing operations.
\n4. NET FINANCE COSTS
\nNotes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)
\n
\n
5. EARNINGS PER SHARE
\nBasic earnings per share are calculated by dividing the profit for the year attributable to equity
\nshareholders of the Company by the average number of ordinary shares in issue during the year.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nProfit attributable to equity shareholders for the year:
\n\u2013 continuing
225
11
\n\u2013 discontinued
6
1,022
\nTotal
231
1,033
\nAverage number of shares in issue during the year (note 24)
352,891,120
386,678,211
\nStatutory earnings per share total \u2013 basic
65.5p
267.1p
\nStatutory earnings per share total \u2013 diluted
65.1p
266.0p
\nStatutory earnings per share continuing operations \u2013 basic
63.8p
2.8p
\nStatutory earnings per share continuing operations \u2013 diluted
63.4p
2.8p
\nDiluted earnings per share are calculated by dividing the profit attributable to ordinary
\nshareholders by 354,681,819 (FY2022: 388,349,758) ordinary shares, being the average number
\nof\u00a0ordinary shares in issue during the year adjusted by the dilutive effect of employee share
\nschemes. No options (FY2022: nil) were excluded from this calculation because their effect
\nwas\u00a0anti-dilutive.
\nA reconciliation of statutory and headline earnings per share is as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\n\u00a3m
\nBasic EPS
\n(p)
\nDiluted EPS
\n(p)
\u00a3m
\nBasic EPS
\n(p)
\nDiluted EPS
\n(p)
\nTotal profit attributable to
\nequity shareholders of the
\nParent Company
231
65.5
65.1
1,033
267.1
266.0
\nExclude: Non-headline items
\n(note 3)
113
(714)
\nHeadline earnings per share
344
97.5
97.0
319
82.5
82.1
\nProfit from continuing
\noperations attributable to
\nequity shareholders of the
\nParent Company
225
63.8
63.4
11
2.8
2.8
\nExclude: Non-headline items
\n(note 3)
119
259
\nHeadline earnings per share \u2013
\ncontinuing operations
344
97.5
97.0
270
69.8
69.5
\n6. TAXATION
\nThis note only provides information about corporate income taxes under IFRS. Smiths companies
\noperate in over 50 countries across the world. They pay and collect many different taxes in
\naddition to corporate income taxes including: payroll taxes; value added and sales taxes; property
\ntaxes; product-specific taxes; and environmental taxes. The costs associated with these other
\ntaxes are included in profit before tax.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nThe taxation charge in the consolidated income statement for the year
\ncomprises:
\nContinuing operations
\n\u2013 current income tax charge
112
68
\n\u2013 current tax adjustments in respect of prior periods
(7)
5
\nCurrent taxation
105
73
\nDeferred taxation
29
17
\nTotal taxation expense \u2013 continuing operations
134
90
\nAnalysed as:
\nHeadline taxation expense
121
104
\nNon-headline taxation charge/(credit)
13
(14)
\nTotal taxation expense in the consolidated income statement
134
90
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nTax on items charged/(credited) to equity
\nDeferred tax:
\n\u2013 retirement benefit schemes
32
\u2013
\n\u2013 share-based payment
\u2013
(1)
\n32
(1)
\nThe \u00a332m (FY2022: \u00a3nil) charge to equity for retirement benefit schemes principally related to UK
\nretirement schemes.
\n
\n
CURRENT TAXATION LIABILITIES
\nCurrent tax
\n\u00a3m
\nAt 31 July 2021
(19)
\nForeign exchange loss
(4)
\nCharge to income statement
(73)
\nTax paid
79
\nAt 31 July 2022
(17)
\nComprising:
\nCurrent tax receivable
50
\nCurrent tax payable within one year
(64)
\nCorporation tax payable after more than one year
(3)
\nAt 31 July 2022
(17)
\nCharge to income statement
(105)
\nTax paid
92
\nAt 31 July 2023
(30)
\nComprising:
\nCurrent tax receivable
47
\nCurrent tax payable within one year
(74)
\nCorporation tax payable after more than one year
(3)
\nAt 31 July 2023
(30)
\nProvisions for tax liabilities amount to \u00a346m (FY2022: \u00a338m) the majority of which relates to the
\nrisk of challenge from tax authorities to the geographic allocation of profits across the Group.
\nIn addition to the risks provided for, the Group faces a variety of other tax risks, which result from
\noperating in a complex global environment, including the ongoing reform of both international and
\ndomestic tax rules, new and ongoing tax audits in the Group\u2019s larger markets and the challenge to
\nfulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of
\nthe Group\u2019s global operations.
\nThe Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24
\nmonths for which provisions are recognised based on best estimates and management\u2019s
\njudgements concerning the ultimate outcome of the audit. Due to the uncertainty associated with
\nsuch items, it is possible at a future date, on conclusion of open tax matters, the final outcome
\nmay vary significantly from the amounts noted above.
\nRECONCILIATION OF THE TAX CHARGE
\nThe headline tax charge for the year of \u00a3121m (FY2022: \u00a3104m) represents an effective rate of
\n26.0% (FY2022: 27.6%).
\nThe tax charge on the profit for the year for continuing operations is different from the standard
\nrate of corporation tax in the UK, with a rate for FY2023 of 21.0% (FY2022: 19.0%). The differences
\nare reconciled as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nProfit before taxation
366
103
\nNotional taxation expense at UK corporate rate of 21% (FY2022: 19.0%)
77
20
\nDifferent tax rates on non-UK profits and losses
13
13
\nNon-deductible expenses and other charges
24
11
\nTax credits and non-taxable income
(10)
(6)
\nNon-headline UK deferred tax asset recognition adjustment
31
5
\nOther adjustments to unrecognised deferred tax
2
10
\nNon-tax relievable loss on UK pensions schemes
\u2013
41
\nTax on Smiths Medical consolidation adjustments
\u2013
2
\nPrior year true-up
(3)
(6)
\nTotal taxation expense in the consolidated income statement
134
90
\nComprising:
\nTaxation on headline profit
121
104
\nNon-headline taxation items:
\n\u2013 Tax credit on non-headline loss
(18)
(19)
\n\u2013 UK deferred tax asset recognition adjustment
31
5
\nTaxation on non-headline items
13
(14)
\nTotal taxation expense in the consolidated income statement
134
90
\nThe table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual
\ntotal tax charge. As a group operating in multiple countries, the actual tax rates applicable to
\nprofits in those countries are different from the UK tax rate. The impact is shown above as
\ndifferent tax rates on non-UK profits and losses. The Group\u2019s worldwide business leads to the
\nconsideration of a number of important factors which may affect future tax charges, such as: the
\nlevels and mix of profitability in different jurisdictions; transfer pricing regulations; tax rates
\nimposed and tax regime reforms; acquisitions; disposals; restructuring activities; and
\nsettlements or agreements with tax authorities.
\n
\n
DEFERRED TAXATION ASSETS/(LIABILITIES)
\nProperty, plant,
\nequipment and
\nintangible
\nassets
\n\u00a3m
\nEmployment
\nbenefits
\n\u00a3m
\nLosses
\ncarried
\nforward
\n\u00a3m
\nProvisions
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nAt 31 July 2021
(56)
(105)
144
78
3
64
\nReallocations
(15)
1
9
1
4
\u2013
\nCharge to income statement \u2013
\ncontinuing operations
4
50
(54)
(10)
(7)
(17)
\nCredit to equity
\u2013
3
\u2013
\u2013
(4)
(1)
\nForeign exchange rate
\nmovements
(9)
\u2013
4
10
\u2013
5
\nAt 31 July 2022
(76)
(51)
103
79
(4)
51
\nComprising:
\nDeferred tax assets
(1)
(56)
76
65
11
95
\nDeferred tax liabilities
(75)
5
27
14
(15)
(44)
\nAt 31 July 2022
(76)
(51)
103
79
(4)
51
\nReallocations
\u2013
(2)
6
(4)
\u2013
\u2013
\nCharge to income statement \u2013
\ncontinuing operations
13
(3)
(32)
(5)
(2)
(29)
\nCredit to equity
\u2013
32
\u2013
\u2013
\u2013
32
\nForeign exchange rate
\nmovements
3
(1)
(2)
(4)
2
(2)
\nAt 31 July 2023
(60)
(25)
75
66
(4)
52
\nComprising:
\nDeferred tax assets
(2)
(27)
50
60
14
95
\nDeferred tax liabilities
(58)
2
25
6
(18)
(43)
\nAt 31 July 2023
(60)
(25)
75
66
(4)
52
\nOf the amounts included within \u2018Other\u2019, shown in the above table, as at 31 July 2023, amounts
\nrelating to tax on unremitted earnings were \u00a319m (FY2022: \u00a319m). The aggregate amount of
\ntemporary differences associated with investments in subsidiaries for which deferred tax
\nliabilities have not been recognised is immaterial.
\nThe deferred tax asset relating to losses has been recognised on the basis of strong evidence of
\nfuture taxable profits against which the unutilised tax losses can be relieved or it is probable that
\nthey will be recovered against the reversal of deferred tax liabilities. The closing net deferred tax
\nasset balance related to UK activities and included in the balance at 31 July 2023 amounted to \u00a3nil
\n(FY2022: \u00a3nil). The deferred tax asset balance for provisions includes \u00a351m (FY2022: \u00a357m)
\nrelating to John Crane Inc. litigation provision, and \u00a39m (FY2022: \u00a312m) relating to Titeflex
\nCorporation. See note 23 for additional information on provisions.
\nUNRECOGNISED DEFERRED TAX
\nThe Group has \u00a3521m of unrecognised deferred tax relating to losses (FY2022: \u00a3335m).
\nThe expiry date of operating losses carried forward is dependent upon the law of the various
\nterritories in which the losses arise. A summary of expiry dates in respect of which deferred tax
\nhas not been recognised is set out below:
\n2023
\n\u00a3m
\nExpiry of
\nlosses
\n2022
\n\u00a3m
\nExpiry of
\nlosses
\nUnrestricted losses \u2013 operating losses
521
No expiry
335
No expiry
\nTotal unrecognised deferred tax on losses
521
335
\nUnrecognised deferred tax relating to losses has increased by \u00a3186m (FY2022: \u00a3228m). This
\ncomprises an increase of \u00a378m that principally matches the reduction in the UK pensions
\ndeferred tax liability, an increase of \u00a375m relating to Detection and Interconnect USA current year
\nlosses and \u00a333m from a FY2022 change in local accounting method for tax purposes resulting in
\nadditional losses being booked in FY2023.
\nDEVELOPMENTS IN THE GROUP TAX POSITION
\nIn December 2021, the Organisation for Economic Co-operation and Development published
\nrules\u00a0relating to global minimum taxation called \u2018Pillar 2 rules\u2019, currently timetabled to apply
\nin\u00a0the UK to accounting periods beginning on or after 1 January 2024 (year ended 31 July 2025
\nfor\u00a0Smiths). The Group will continue to monitor the development and future implementation of
\nthese rules globally.
\nSmiths is actively working to fully understand the impact of the new rules and developing
\nprocesses to enable compliance. Based upon our latest understanding, the current estimate of
\nadditional tax payable is not expected to have a material impact on the Group.
\n7. EMPLOYEES
\nYear ended 31 July 2023
Year ended 31 July 2022
\nContinuing
\noperations
\n\u00a3m
\nDiscontinued
\noperations
\n\u00a3m
\nTotal
\n\u00a3m
\nContinuing
\noperations
\n\u00a3m
\nDiscontinued
\noperations
\n\u00a3m
\nTotal
\n\u00a3m
\nStaff costs during the period
\nWages and salaries
802
\u2013
802
700
91
791
\nSocial security
92
\u2013
92
81
9
90
\nShare-based payment (note 9)
14
\u2013
14
13
2
15
\nPension costs (including defined
\ncontribution schemes) (note 8)
31
\u2013
31
29
5
34
\n939
\u2013
939
823
107
930
\n
\n
The average number of persons employed, including employees on permanent, fixed term and
\ntemporary contracts, rounded to the nearest 50 employees was:
\nYear ended
\n31 July 2023
\nYear ended
\n31 July 2022
\nJohn Crane
6,050
6,050
\nSmiths Detection
3,250
3,100
\nFlex-Tek
3,750
3,300
\nSmiths Interconnect
2,800
2,500
\nCorporate (including central/shared IT services)
300
300
\nContinuing operations
16,150
15,250
\nDiscontinued operations \u2013 Smiths Medical (in period to 6 January 2022)
\u2013
6,700
\nTotal
16,150
21,950
\nKEY MANAGEMENT
\nThe key management of the Group comprises Smiths Group plc Board Directors and Executive
\nCommittee members. Their aggregate compensation is shown below. Details of Directors\u2019
\nremuneration are contained in the report of the Remuneration & People Committee on pages 98
\nto 110.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nKey management compensation
\nSalaries and short-term employee benefits
12.0
10.3
\nCost of retirement benefits
0.7
0.7
\nCost of share-based incentive plans
4.9
4.7
\nNo member of key management had any material interest during the period in a contract of
\nsignificance (other than a service contract or\u00a0a\u00a0qualifying third-party indemnity provision) with the
\nCompany or any of its subsidiaries.
\nOptions and awards held at the end of the period by key management in respect of the Company\u2019s
\nshare-based incentive plans were:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nNumber of
\ninstruments
\n\u2019000
\nWeighted
\naverage
\nexercise
\nprice
\nNumber of
\ninstruments
\n\u2019000
\nWeighted
\naverage
\nexercise
\nprice
\nLTIP
1,580
1,411
\nRestricted stock
\u2013
8
\nSAYE
16
\u00a311.45
16
\u00a311.43
\nRELATED PARTY TRANSACTIONS
\nThe only related party transactions in FY2023 were key management compensation
\n(FY2022: key management compensation).
\n8. RETIREMENT BENEFITS
\nSmiths provides retirement benefits to employees in a number of countries. This includes defined
\nbenefit and defined contribution plans and, mainly in the United Kingdom (UK) and United States
\nof America (US), post-retirement healthcare.
\nDEFINED CONTRIBUTION PLANS
\nThe Group operates defined contribution plans across many countries. In the UK a defined
\ncontribution plan has been offered since the closure of the UK defined benefit pension plans. In
\nthe US a 401(k) defined contribution plan operates. The total expense recognised in the
\nconsolidated income statement in respect of all these plans was \u00a331m (FY2022: \u00a334m).
\nDEFINED BENEFIT AND POST-RETIREMENT HEALTHCARE PLANS
\nThe principal defined benefit pension plans are in the UK and in the US and these have been
\nclosed so that no future benefits are accrued.
\nFor all schemes, pension costs are assessed in accordance with the advice of independent,
\nprofessionally qualified actuaries. These valuations have been updated by independent qualified
\nactuaries in order to assess the liabilities of the schemes as at 31 July 2023. Contributions to the
\nschemes are made on the advice of the actuaries, in accordance with local funding requirements.
\nThe changes in the present value of the net pension asset in the period were:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nAt beginning of period
194
413
\nForeign exchange rate movements
1
\u2013
\nCurrent service cost
(2)
(2)
\nHeadline scheme administration costs
(4)
(4)
\nNon-headline scheme administration costs
(2)
\nPast service cost, curtailments, settlements \u2013 continuing operations
4
(214)
\nSettlements \u2013 discontinued operations
\u2013
(3)
\nFinance income \u2013 retirement benefits
7
7
\nContributions by employer
5
9
\nActuarial (losses)/gains
(114)
3
\nRetirement benefit obligations disposed of with Smiths Medical
\u2013
5
\nUnrecognised assets due to surplus restriction
\u2013
(20)
\nNet retirement benefit asset
89
194
\nThe \u00a3413m net retirement benefit asset at the start of FY2022 included \u00a35m of pension obligations
\ndisclosed within liabilities held for sale.
\n
\n
UK PENSION SCHEMES
\nSmiths Group\u2019s funded UK pension schemes are subject to a statutory funding objective, as set
\nout in UK pension legislation. Scheme trustees need to obtain regular actuarial valuations to
\nassess the scheme against this funding objective. The trustees and sponsoring companies need
\nto agree funding plans to improve the position of a scheme when it is below the acceptable
\nfunding level.
\nThe UK Pensions Regulator has extensive powers to protect the benefits of members, promote
\ngood administration and reduce the risk\u00a0of situations arising which may require compensation
\nto\u00a0be paid from the Pension Protection Fund. These include imposing\u00a0a schedule of contributions
\nor the calculation of the technical provisions, where a trustee and company fail to agree
\nappropriate calculations.
\nSmiths Industries Pension Scheme (SIPS)
\nThis scheme was closed to future accrual effective 1 November 2009. SIPS provides index-linked
\n(to applicable caps) pension benefits based on final earnings at date of closure. SIPS is governed
\nby a corporate trustee (S.I. Pension Trustees Limited, a wholly owned subsidiary of Smiths Group
\nplc). The board of trustee directors currently comprises four Company-nominated trustees and
\nfour member-nominated trustees, with an independent chairman selected by Smiths Group plc.
\nTrustee directors are responsible for the management, administration, funding and investment
\nstrategy of the scheme.
\nThe most recent actuarial valuation of this scheme has been performed using the Projected Unit
\nMethod as at 31 March 2020. The valuation showed a surplus of \u00a334m on the Technical Provisions
\nfunding basis at the valuation date and the funding position has improved since then. As part of
\nthe valuation agreement, no contributions are currently being paid to SIPS and the Group\u2019s
\ncurrent expectation is that these contributions will not recommence (although there are
\ncircumstances relating to the Scheme\u2019s funding level in which contributions could be due to
\nSIPS). The next actuarial valuation, due as at 31 March 2023, is currently in progress, with the
\nresults expected later in 2023.
\nThe duration of SIPS liabilities is around 18 years (FY2022: 20 years) for active deferred members,
\n19 years (FY2022: 20 years) for deferred members and 10 years (FY2022: 11 years) for pensioners
\nand dependants. Durations have reduced primarily due to the increase in discount rate
\nassumption, which reduces the average time it takes to receive all future pension payments when
\nweighted by the present value of those future pension payments.
\nUnder the governing documentation of SIPS, any future surplus would be returnable to
\nSmiths\u00a0Group plc by refund, assuming gradual settlement of the liabilities over the lifetime
\nof\u00a0the\u00a0scheme.
\nIn SIPS, as part of ongoing data cleansing work being undertaken to prepare the scheme for a
\npotential full buy-out in the future, a wider review is being carried out to determine if the method
\nused in the early 1990s to equalise retirement ages between men and women was implemented
\ncorrectly. In FY2022, an additional liability of \u00a319m was recognised as a past service cost to reflect
\nthe expected impact of correcting this issue for certain sections of the scheme. In the current
\nyear, a further liability of \u00a312m has been recognised and \u00a316m recognised in previous years has
\nbeen released following the identification of additional evidence of the obligation for equalisation,
\nresulting in a net credit to the income statement of \u00a34m. The review remains ongoing however, no
\nfurther material additional liabilities are expected.
\nSIPS uses a Liability Driven Investment (LDI) strategy to hedge against interest and inflation rate
\nchanges. During the significant volatility that followed the UK Government\u2019s mini budget in
\nSeptember 2022, this hedging policy meant that SIPS asset values fell, as did the value of its
\nobligations. All of SIPS\u2019s collateral requirements in respect of the LDI assets were met, with no
\nsupport required from the Group.
\nTI Group Pension Scheme (TIGPS)
\nThis scheme was closed to future accrual effective 1 November 2009. TIGPS provides index-
\nlinked (to applicable caps) pension benefits based on final earnings at the date of closure. TIGPS
\nis governed by a corporate trustee (TI Pension Trustee Limited, an independent company). The
\nboard of trustee directors comprises four Company-nominated trustees and four member-
\nnominated trustees, with an independent trustee director selected by the trustee. The trustee is
\nresponsible for the management, administration, funding and investment strategy of the scheme.
\nIn June 2022 the TIGPS trustee completed a deal to secure its remaining uninsured pension
\nliabilities, by way of a bulk annuity buy-in with Rothesay Life plc. This means all of the scheme\u2019s
\nliabilities are insured via seven buy-in policies. The final buy-in has been secured with an intention
\nto fully buy-out the Scheme as soon as reasonably practical and within a period of four years. The
\nFY2022 income statement recognised a settlement loss of \u00a3171m in relation to the buy-in.
\nIn terms agreed between the Group and the TIGPS trustee prior to the transaction, when TIGPS
\nconverts all of its buy-in policies to buy-out policies and subsequently winds up, the trustee is
\nexpected to use any surplus remaining, after the costs of buying-out and winding up the scheme
\nhave been met, to improve member benefits. The FY 2022 income statement recognised a past
\nservice cost of \u00a324m in relation to the derecognition of the remaining surplus. The Group has no
\nexpectation of receiving a refund from the scheme and has placed an economic benefit value of
\nzero on the TIGPS surplus from 10 June 2022.
\nAs TIGPS currently retains the legal obligation to pay all scheme benefits, TIGPS liabilities remain
\npart of the retirement benefit obligations on the balance sheet alongside the corresponding
\nbuy-in assets. These liabilities and assets will be derecognised at the point the buy-in policies are
\nconverted to buy-outs and the legal obligation for payment of benefits is transferred to the
\nrelevant insurers.
\nThe most recent actuarial valuation of this scheme has been performed using the Projected Unit
\nMethod as at 5 April 2020. The valuation showed a surplus of \u00a322m on the Technical Provisions
\nfunding basis at the valuation date and the funding position has improved since then. Given
\nTIGPS\u2019s circumstances, the Group\u2019s current expectation is that no further contributions to TIGPS
\nwill be required. The next actuarial valuation, due as at 5 April 2023, is currently in progress, with
\nthe results expected later in 2023.
\nThe duration of the TIGPS liabilities is around 20 years (FY2022: 21 years) for active deferred
\nmembers, 18 years (FY2022: 19 years) for deferred members and 10 years (FY2022: 10 years) for
\npensioners and dependants.
\n
\n
US PENSION PLANS
\nThe valuations of the principal US pension and post-retirement healthcare plans were performed
\nusing census data at 1 January 2023.
\nThe pension plans were closed with effect from 30 April 2009 and benefits were calculated as
\nat\u00a0that date and are not revalued. Governance of the US pension plans is overseen by a Settlor
\nCommittee appointed by Smiths Group Services Corp, a wholly owned subsidiary of the Group.
\nThe duration of the liabilities for the largest US plan is around 15 years (FY2022: 16 years) for
\nactive deferred members, 14 years (FY2022: 15 years) for deferred members and 10 years
\n(FY2022: 10 years) for pensioners and dependants.
\nRISK MANAGEMENT
\nIn respect of uninsured liabilities, the pensions schemes are exposed to risks that:
\n\u2013
Investment returns are below expectations, leaving the schemes with insufficient assets in
\nfuture to pay all their pension obligations;
\n\u2013
Members and dependants live longer than expected, increasing the value of the pensions which
\nthe schemes have to pay;
\n\u2013
Inflation rates are higher than expected, causing amounts payable under index-linked pensions
\nto be higher than expected; and
\n\u2013
Increased contributions are required to meet funding targets if lower interest rates increase
\nthe current value of\u00a0liabilities.
\nThese risks are managed separately for each pension scheme. However, the Group has adopted a
\ncommon approach of closing defined benefit schemes to cap members\u2019 entitlements and of
\nsupporting trustees in adopting investment strategies which aim to hedge the value of assets
\nagainst changes in the value of liabilities caused by changes in interest and inflation rates.
\nAcross SIPS and TIGPS, approximately 60% of all liabilities are now de-risked through 11
\nbulk\u00a0annuities.
\nTIGPS
\nTIGPS has covered roughly 100% of liabilities with matching annuities, eliminating investment
\nreturn, longevity, inflation and funding risks in respect of those liabilities.
\nSIPS
\nSIPS has covered roughly 33% of liabilities with matching annuities, eliminating investment
\nreturn, longevity, inflation and funding risks in respect of those liabilities. It has also adopted a
\nLDI strategy to hedge interest and inflation risks of the scheme\u2019s uninsured liabilities by
\ninvestment in gilts together with the use of gilt repurchase arrangements, total return swaps,
\ninflation swaps and interest rate swaps. The strategy also takes into account the scheme\u2019s
\ncorporate bond investments.
\nThe critical estimates and principal assumptions used in updating the valuations are set
\nout\u00a0below:
\n2023
\nUK
\n2023
\nUS
\n2023
\nOther
\n2022
\nUK
\n2022
\nUS
\n2022
\nOther
\nRate of increase in salaries
n/a
n/a
2.5%
n/a
n/a
2.2%
\nRate of increase for active deferred
\nmembers
4.0%
n/a
n/a
4.0%
n/a
n/a
\nRate of increase in pensions in payment
3.3%
n/a
1.6%
3.4%
n/a
1.2%
\nRate of increase in deferred pensions
3.3%
n/a
n/a
3.4%
n/a
n/a
\nDiscount rate
5.1%
5.2%
2.8%
3.5%
4.5%
1.1%
\nInflation rate
3.3%
n/a
0.4%
3.4%
n/a
1.3%
\nThe assumptions used in calculating the costs and obligations of the Group\u2019s defined benefit
\npension plans are set by the Group after consultation with independent professionally qualified
\nactuaries. The assumptions used are estimates chosen from a range of possible actuarial
\nassumptions which, due to the timescale covered, may not necessarily occur in practice. For
\ncountries outside the UK and USA, assumptions are disclosed as a weighted average.
\nInflation rate assumptions
\nThe RPI inflation assumption of 3.3% has been derived using the Aon UK Government Gilt Prices
\nOnly Curve with an Inflation Risk Premium of 0.2% p.a.
\nThe Government\u2019s response to its consultation on RPI reform was published on 25 November
\n2020, and strongly implied that RPI will become aligned with CPI-H from 2030. No specific
\nallowance (beyond anything already priced into markets) has been factored into the RPI
\nassumptions for potential changes. The assumption for the long-term gap between RPI and CPI is
\n0.5% p.a. (FY2022:\u00a00.6%) reflecting the Group\u2019s view on the market pricing of this gap over the
\nlifetime of the UK schemes\u2019 liabilities, i.e., 0.9% p.a. (FY2022: 1.0%) pre-2030 and 0.1% p.a.
\npost-2030 (FY2022: 0.2%).
\nShort-term inflation has continued at rates higher than the Government\u2019s targets, though future
\ninflation is expected to fall in the short term as the Bank of England increases interest rates to
\ncombat high inflation. Consequently, the long-term inflation assumptions are similar to the prior
\nyear. The full impact of current high inflation is mitigated to an extent by the caps in place on
\nindex-linked increases. The Board considered and declined a request from the Trustee of SIPS to
\nrecommend an additional discretionary increase to pensions in payment. However, there is no
\nchange in the Group\u2019s constructive obligations and allowance for certain discretionary increases
\nin future continues to be included in the defined benefit obligations shown below.
\n
\n
Discount rate assumptions
\nThe UK schemes use a discount rate based on the annualised yield on the Aon GBP Single Agency
\nSelect AA Curve, using the expected cash-flows from a notional scheme with obligations of the
\nsame duration as that of the UK schemes, whereas in previous years the Aon GBP Select AA
\nCurve was used. The increase in the discount rate assumption at 31 July 2023 arises from market
\nconditions and is not impacted by the change in discount rate methodology.
\nThe US Plan uses a discount rate based on the annualised yield derived from Willis Towers
\nWatson\u2019s RATE:Link (10th \u2013 90th) model using the Plan\u2019s expected cash-flows.
\nThe discount rate assumptions have increased significantly since the prior year, largely due to
\nthe\u00a0significant volatility that followed the UK Government\u2019s mini budget in September 2022,
\nthough other factors have contributed to the continued rise in bond yields since then, including
\nheightened political uncertainty, increases to interest rates to combat persistent high inflation
\nand market illiquidity. A\u00a0higher discount rate has led to a lower value being placed on the
\nretirement benefit obligations, though there has also been a corresponding reduction in the
\nvalue\u00a0of assets.
\nMortality assumptions
\nThe mortality assumptions used in the principal UK schemes are based on the latest \u2018SAPS S3\u2019
\nbirth year tables with relevant scaling factors based on the recent experience of the schemes.
\nThe assumption allows for future improvements in life expectancy in line with the 2021 latest
\n2022 CMI projections, with a smoothing factor of 7.0 and \u2018A\u2019 parameter of 0.5%/0.25% (SIPS/
\nTIGPS) and blended to a long-term rate of 1.25%. The latest CMI projections incorporate
\nallowance for the impact of COVID-19, equivalent to a reduction in life expectancy of around
\n0.5\u00a0years.
\nThe mortality assumptions used in the principal US schemes are based on generational mortality
\nusing the latest Pri-2012 sex-distinct, employee/non-disabled annuitant table, with a 2012 base
\nyear, projected forward generationally with the latest MP-2021 mortality scale. No explicit
\nadjustment has been made to mortality assumptions in respect of COVID-19. The impact of
\nCOVID-19 remains uncertain and further data studies are underway to better predict the impact
\non future mortality.
\nExpected further years of life
\nUK schemes
\nMale
\n31 July 2023
\nFemale
\n31 July 2023
\nMale
\n31 July 2022
\nFemale
\n31 July 2022
\nMember who retires next year at age 65
21
23
22
24
\nMember, currently 45, when they retire in 20 years\u2019 time
20
24
23
25
\nExpected further years of life
\nUS schemes
\nMale
\n31 July 2023
\nFemale
\n31 July 2023
\nMale
\n31 July 2022
\nFemale
\n31 July 2022
\nMember who retires next year at age 65
21
22
21
22
\nMember, currently 45, when they retire in 20 years\u2019 time
22
24
22
24
\nSENSITIVITY
\nSensitivities in respect of the key assumptions used to measure the principal pension schemes as
\nat 31 July 2023 are set out below. These sensitivities show the hypothetical impact of a change in
\neach of the listed assumptions in isolation, with the exception of the sensitivity to inflation which
\nincorporates the impact of certain correlating assumptions. In practice, such assumptions rarely
\nchange in\u00a0isolation.
\nProfit before
\ntax
\nfor year
\nended
\n31 July 2023
\n\u00a3m
\nIncrease/
\n(decrease) in
\nscheme
\nassets
\n31 July 2023
\n\u00a3m
\n(Increase)/
\ndecrease in
\nscheme
\nliabilities
\n31 July 2023
\n\u00a3m
\nProfit before
\ntax
\nfor year
\nended
\n31 July 2022
\n\u00a3m
\nIncrease/
\n(decrease) in
\nscheme
\nassets
\n31 July 2022
\n\u00a3m
\n(Increase)/
\ndecrease in
\nscheme
\nliabilities
\n31 July 2022
\n\u00a3m
\nRate of mortality \u2013 one year
\nincrease in life expectancy
(2)
60
(88)
(2)
84
(135)
\nRate of mortality \u2013 one year
\ndecrease in life expectancy
2
(62)
89
2
(84)
136
\nRate of inflation \u2013 0.25% increase
(1)
23
(43)
(1)
34
(69)
\nDiscount rate \u2013 0.25% increase
2
(36)
60
2
(49)
97
\nMarket value of scheme assets \u2013
\n2.5% increase
2
30
\u2013
1
40
\u2013
\nThe effect on profit before tax reflects the impact of current service cost and net interest cost.
\nThe value of the scheme assets is affected by\u00a0changes in mortality rates, inflation and discounting
\nbecause they affect the carrying value of the insurance assets.
\nAsset valuation
\nThe pension schemes hold assets in a variety of pooled funds, in which the underlying assets
\ntypically are invested in credit and cash assets. These funds are valued. The price of the funds is
\nset by administrators/custodians employed by the investment managers and based on the value
\nof the underlying assets held in the funds. Prices are generally updated daily, weekly or quarterly
\ndepending upon the frequency of the fund\u2019s dealing.
\nBonds are valued using observable broker quotes. Gilt repurchase obligations are valued by
\nthe\u00a0relevant manager, which derives the value using an industry recognised model with
\nobservable inputs.
\nTotal return, interest and inflation swaps and forward FX contracts are bilateral agreements
\nbetween counterparties and do not have observable market prices. These derivative contracts
\nare valued using observable inputs.
\nInsured liabilities comprise annuity policies that match all or part of the scheme obligation to
\nidentified groups of members. These assets are valued by an external qualified actuary at the
\nactuarial valuation of the corresponding liability, reflecting this matching relationship.
\nThe insurance policies are treated as qualifying insurance policies as none of the insurers are
\nrelated parties of Smiths Group, and the proceeds of the policies can only be used to pay or fund
\nemployee benefits for the respective schemes, are not available to Smiths Group\u2019s creditors and
\ncannot be paid to Smiths Group.
\n
\n
Retirement benefit plan assets
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nCash and cash equivalents
93
1
1
95
\nPooled funds:
\n\u2013 Pooled equity
\u2013
\u2013
3
3
\n\u2013 Pooled Diversified Growth
\u2013
\u2013
13
13
\n\u2013 Pooled credit
320
\u2013
\u2013
320
\nCorporate bonds
203
141
\u2013
344
\nGovernment bonds/LDI
421
44
3
468
\nInsured liabilities
1,323
\u2013
\u2013
1,323
\nProperty
7
\u2013
\u2013
7
\nTotal market value
2,367
186
20
2,573
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nCash and cash equivalents
90
1
1
92
\nPooled funds:
\n\u2013 Pooled equity
\u2013
\u2013
3
3
\n\u2013 Pooled Diversified Growth
\u2013
\u2013
15
15
\n\u2013 Pooled credit
379
\u2013
\u2013
379
\nCorporate bonds
412
167
\u2013
579
\nGovernment bonds/LDI
498
57
3
558
\nInsured liabilities
1,649
\u2013
\u2013
1,649
\nProperty
39
\u2013
\u2013
39
\nTotal market value
3,067
225
22
3,314
\nThe UK Government bonds/LDI portfolios contain \u00a3717m (FY2022: \u00a3960m) of UK Government
\nbonds (gilts), \u00a3276m (FY2022: \u00a3476m) of gilt repurchase obligations and \u00a318m of interest and
\ninflation swap obligations (FY2022: \u00a39m assets) and forward FX contracts with a net obligation
\nof\u00a0\u00a32m (FY2022: \u00a35m asset). These are held to hedge against foreign currency risk. The pooled
\nfunds, insured liabilities and property assets are unquoted. The scheme assets do not include any
\nproperty occupied by, or other assets used by, the Group.
\nThe asset valuations are effective as at the end of the period, consistent with the calculations
\ndetermining the obligations, except for a small legacy commercial property investment which is
\ndue to be sold down over 2023. This investment is only valued at the end of each calendar quarter,
\nso no valuation is available as at the period end. The Group considers taking the most recent
\navailable valuation to be appropriate given the size of the commercial property investment relative
\nto the overall value of invested assets and wider commercial property market returns since the
\nmost recent valuation.
\nThe Group acknowledges that responsibility for the effective management of the schemes\u2019
\nassets\u00a0lies primarily with the trustees, but also accepts that any risks inherent in the investment
\nstrategy, including ESG and climate risk, are ultimately underwritten by the Group. Consequently,
\nthe Group ensures that the trustees\u2019 investment strategy and statements of investment principles
\nare compatible with the Group\u2019s wider sustainability strategy. For TIGPS, where all benefits are
\nnow secured by way of annuity purchase, all investment risks including ESG and climate risk,
\nhave effectively now been eliminated. For SIPS, a significant portion of investment risks have
\nalready been eliminated through annuity purchase and the scheme\u2019s time horizon to full buy-in,
\nhence exposure to investment risks including ESG and climate risk, continues to reduce.
\nPresent value of funded scheme liabilities and assets for the main UK and US schemes
\n31 July 2023 \u2013 \u00a3m
\nSIPS
TIGPS
\nUS
\nschemes
\nPresent value of funded scheme liabilities:
\n\u2013 Active deferred members
(25)
(18)
(31)
\n\u2013 Deferred members
(388)
(326)
(86)
\n\u2013 Pensioners
(838)
(561)
(85)
\nPresent value of funded scheme liabilities
(1,251)
(905)
(202)
\nMarket value of scheme assets
1,446
921
186
\nSurplus restriction
\u2013
(16)
\u2013
\nSurplus/(deficit)
195
\u2013
(16)
\n31 July 2022 \u2013 \u00a3m
\nSIPS
TIGPS
\nUS
\nschemes
\nPresent value of funded scheme liabilities:
\n\u2013 Active deferred members
(32)
(23)
(41)
\n\u2013 Deferred members
(561)
(442)
(109)
\n\u2013 Pensioners
(1,010)
(670)
(88)
\nPresent value of funded scheme liabilities
(1,603)
(1,135)
(238)
\nMarket value of scheme assets
1,912
1,155
225
\nSurplus restriction
\u2013
(20)
\u2013
\nSurplus/(deficit)
309
\u2013
(13)
\n
\n
Net retirement benefit obligations
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nMarket value of scheme assets
2,367
186
20
2,573
\nPresent value of funded scheme liabilities
(2,156)
(202)
(25)
(2,383)
\nSurplus restriction
(16)
\u2013
\u2013
(16)
\nSurplus/(deficit)
195
(16)
(5)
174
\nUnfunded pension plans
(37)
(6)
(36)
(79)
\nPost-retirement healthcare
(3)
(1)
(2)
(6)
\nPresent value of unfunded obligations
(40)
(7)
(38)
(85)
\nNet pension asset/(liability)
155
(23)
(43)
89
\nComprising:
\nRetirement benefit assets
195
\u2013
\u2013
195
\nRetirement benefit liabilities
(40)
(23)
(43)
(106)
\nNet pension asset/(liability)
155
(23)
(43)
89
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nMarket value of scheme assets
3,067
225
22
3,314
\nPresent value of funded scheme liabilities
(2,738)
(238)
(27)
(3,003)
\nSurplus restriction
(20)
\u2013
\u2013
(20)
\nSurplus/(deficit)
309
(13)
(5)
291
\nUnfunded pension plans
(43)
(7)
(40)
(90)
\nPost-retirement healthcare
(4)
(1)
(2)
(7)
\nPresent value of unfunded obligations
(47)
(8)
(42)
(97)
\nNet pension asset/(liability)
262
(21)
(47)
194
\nComprising:
\nRetirement benefit assets
309
\u2013
\u2013
309
\nRetirement benefit liabilities
(47)
(21)
(47)
(115)
\nNet pension asset/(liability)
262
(21)
(47)
194
\nWhere any individual scheme shows a recoverable surplus under IAS 19, this is disclosed on the
\nbalance sheet as a retirement benefit asset. The IAS 19 surplus of any one scheme is not available
\nto fund the IAS 19 deficit of another scheme. The retirement benefit asset disclosed arises from
\nthe rights of the employers to recover the surplus at the end of the life of the scheme, i.e., when
\nthe last beneficiary\u2019s obligation has been met.
\nAmounts recognised in the consolidated income statement
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nAmounts charged to operating profit
\nCurrent service cost
2
2
\nPast service costs \u2013 benefit equalisations
(5)
43
\nSettlement loss
1
171
\nHeadline scheme administration costs
4
4
\nNon-headline scheme administration costs
2
\u2013
\n4
220
\nThe operating cost is charged as follows:
\nHeadline administrative expenses
6
6
\nNon-headline settlement loss
1
171
\nNon-headline administrative expenses
(3)
43
\n4
220
\nAmounts credited to finance costs
\nNon-headline other finance income \u2013 retirement benefits
(7)
(7)
\nAmounts recognised directly in the consolidated statement of comprehensive income
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nRe-measurements of retirement defined benefit assets and liabilities
\nDifference between interest credit and return on assets
(660)
(835)
\nExperience gains on scheme liabilities
(54)
(31)
\nActuarial gains arising from changes in demographic assumptions
48
1
\nActuarial gains/(losses) arising from changes in financial assumptions
548
868
\nMovement in surplus restriction
4
(20)
\n(114)
(17)
\n
\n
Changes in present value of funded scheme assets
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
3,067
225
22
3,314
\nInterest on assets
105
10
1
116
\nActuarial movement on scheme assets
(638)
(21)
(1)
(660)
\nScheme administration costs
(5)
(1)
\u2013
(6)
\nForeign exchange rate movements
\u2013
(10)
\u2013
(10)
\nAssets distributed on settlements
\u2013
(4)
\u2013
(4)
\nBenefits paid
(162)
(13)
(2)
(177)
\nAt end of period
2,367
186
20
2,573
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
4,104
272
30
4,406
\nInterest on assets
70
8
1
79
\nActuarial movement on scheme assets
(773)
(62)
\u2013
(835)
\nEmployer contributions
3
\u2013
1
4
\nScheme administration costs
(3)
(1)
\u2013
(4)
\nForeign exchange rate movements
\u2013
33
\u2013
33
\nAssets transferred on business disposal
\u2013
\u2013
(5)
(5)
\nAssets distributed on settlements
(180)
\u2013
\u2013
(180)
\nCurtailment gains/(losses)
\u2013
(9)
\u2013
(9)
\nBenefits paid
(154)
(16)
(5)
(175)
\nAt end of period
3,067
225
22
3,314
\nChanges in present value of funded defined benefit obligations
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
(2,738)
(238)
(27)
(3,003)
\nPast service costs
4
\u2013
\u2013
4
\nInterest on obligations
(94)
(10)
(1)
(105)
\nActuarial movement on liabilities
510
19
1
530
\nForeign exchange rate movements
\u2013
11
\u2013
11
\nLiabilities extinguished on settlements
\u2013
3
\u2013
3
\nBenefits paid
162
13
2
177
\nAt end of period
(2,156)
(202)
(25)
(2,383)
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
(3,558)
(273)
(38)
(3,869)
\nPast service costs
(43)
\u2013
\u2013
(43)
\nInterest on obligations
(61)
(8)
(1)
(70)
\nActuarial movement on liabilities
761
54
2
817
\nForeign exchange rate movements
\u2013
(33)
\u2013
(33)
\nLiabilities transferred on business disposal
\u2013
\u2013
5
5
\nCurtailment gains/(losses)
\u2013
6
\u2013
6
\nLiabilities extinguished on settlements
9
\u2013
\u2013
9
\nBenefits paid
154
16
5
175
\nAt end of period
(2,738)
(238)
(27)
(3,003)
\nChanges in present value of unfunded defined benefit pensions and post-retirement
\nhealthcare plans
\nAssets
Obligations
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nAt beginning of period
\u2013
\u2013
(98)
(124)
\nCurrent service cost
\u2013
\u2013
(1)
(1)
\nInterest on obligations
\u2013
\u2013
(3)
(2)
\nActuarial movement
\u2013
\u2013
12
21
\nEmployer contributions
5
5
\u2013
\u2013
\nLiabilities transferred on business
\ndisposal
\u2013
\u2013
\u2013
4
\nBenefits paid
(5)
(5)
5
5
\nAt end of period
\u2013
\u2013
(85)
(97)
\n
\n
Changes in the effect of the asset ceiling over the year
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nIrrecoverable asset at beginning of period
(20)
\u2013
\nActuarial movement on scheme assets
4
(20)
\nAt end of period
(16)
(20)
\nCash contributions
\nCompany contributions to the defined benefit pension plans and post-retirement healthcare plans
\ntotalled \u00a35m (FY2022: \u00a39m). No contributions were made to funded schemes in the year (FY2022:
\n\u00a33m to SIPS, \u00a31m to Other). During the year, \u00a35m (FY2022: \u00a35m) was spent on providing benefits
\nunder unfunded defined benefit pension and post-retirement healthcare plans.
\nIn FY2024, cash contributions to the Group\u2019s schemes are expected to be up to \u00a310m in total.
\n9. EMPLOYEE SHARE SCHEMES
\nThe Group operates share schemes and plans for the benefit of employees. The nature of the
\nprincipal schemes and plans, including general conditions, is set out below:
\nLONG-TERM INCENTIVE PLAN (LTIP)
\nThe LTIP is a share plan under which an award over a capped number of shares will vest after the
\nend of a three-year performance period if performance conditions are met. LTIP awards are
\nmade to selected senior executives, including the Executive Directors.
\nLTIP performance conditions
\nEach performance condition has a threshold below which no shares vest and a maximum
\nperformance target at or above which the award vests in full. For performance between
\n\u2018threshold\u2019 and \u2018maximum\u2019, awards vest on a straight-line sliding scale. The performance
\nconditions are assessed separately; so performance on one condition does not affect the
\nvesting\u00a0of the other elements of the award. To the extent that the performance targets are not
\nmet\u00a0over the three-year performance period, awards lapse. There is no re-testing of the
\nperformance conditions.
\nLTIP awards have performance conditions relating to organic revenue growth, growth in headline
\nEPS, ROCE, free cash-flow and meeting ESG targets.
\nSMITHS EXCELLENCE PLAN (SEP)
\nThe last Smiths Excellence Plan (SEP) grant was issued in October 2019, vested on 31 July 2021
\nand exercised in October 2021. No further SEP awards have been made.
\nRESTRICTED STOCK
\nRestricted stock is used by the Remuneration & People Committee, as a part of recruitment
\nstrategy, to make awards in recognition of incentive arrangements forfeited on leaving a previous
\nemployer. If an award is considered appropriate, the award will take account of relevant factors
\nincluding the fair value of awards forfeited, any performance conditions attached, the likelihood of
\nthose conditions being met and the proportion of the vesting period remaining.
\nSAVE AS YOU EARN (SAYE)
\nThe SAYE scheme is an HM Revenue & Customs approved all-employee savings-related share
\noption scheme which is open to all UK employees. Participants enter into a contract to save a
\nfixed amount per month of up to \u00a3500 in aggregate for three years and are granted an option
\nover\u00a0shares at a fixed option price, set at a discount to market price at the date of invitation to
\nparticipate. The number of shares is determined by the monthly amount saved and the bonus paid
\non maturity of the savings contract. Options granted under the SAYE scheme are not subject to
\nany performance conditions.
\nOrdinary shares under option/award (\u2019000)
\nLong-term
\nincentive
\nplans
SEP
\nRestricted
\nstock
\nSave as you
\nearn
\nscheme
Total
\nWeighted
\naverage
\nexercise
\nprice
\n31 July 2021
4,915
851
64
1,085
6,915
\u00a31.63
\nReclassification
348
(348)
\u2013
\u2013
\u2013
\u2013
\nGranted
2,255
\u2013
212
167
2,634
\u00a30.71
\nExercised
(224)
(313)
(163)
(138)
(838)
\u00a31.90
\nLapsed
(1,984)
(190)
(30)
(229)
(2,433)
\u00a30.97
\n31 July 2022
5,310
\u2013
83
885
6,278
\u00a31.45
\nGranted
2,023
\u2013
24
253
2,300
\u00a31.47
\nExercised
(309)
\u2013
(20)
(109)
(438)
\u00a32.88
\nLapsed
(2,196)
\u2013
\u2013
(71)
(2,267)
\u00a30.33
\n31 July 2023
4,828
\u2013
87
958
5,873
\u00a31.78
\nOptions and awards were exercised on an irregular basis during the period. The average closing
\nshare price over the financial year was 1,629.8p (FY2022: 1,476.3p). There has been no change to
\nthe effective option price of any of the outstanding options during the period. The number of
\nexercisable share options at 31 July 2023 was nil (31 July 2022: nil).
\nRange of exercise prices
\nTotal shares under
\noptions/awards
\nat 31 July 2023
\n(\u2019000)
\nWeighted average
\nremaining
\ncontractual
\nlife at 31 July 2023
\n(months)
\nTotal shares under
\noptions/awards
\nat 31 July 2022
\n(\u2019000)
\nWeighted
\naverage
\nremaining
\ncontractual
\nlife at 31 July 2022
\n(months)
\n\u00a30.00 \u2013 \u00a32.00
4,915
17
5,393
19
\n\u00a36.01 \u2013 \u00a310.00
444
6
490
18
\n\u00a310.01 \u2013 \u00a312.00
514
33
395
29
\nFor the purposes of valuing options to arrive at the share-based payment charge, the binomial
\noption pricing model has been used. The key assumptions used in the model were volatility of 25%
\nto 20% (FY2022: 25% to 20%) and dividend yield of 2.4% (FY2022: 2.6%), based on historical data,
\nfor the period corresponding with the vesting period of the option. These generated a weighted
\naverage fair value for LTIP of \u00a315.03 (FY2022: \u00a314.81), and restricted stock of \u00a314.60 (FY2022:
\n\u00a314.59). Staff costs included \u00a314m (FY2022: \u00a315m) for share-based payments, of which \u00a313m
\n(FY2022: \u00a314m) related to equity-settled share-based payments.
\n
\n
10. INTANGIBLE ASSETS
\nGoodwill
\n\u00a3m
\nDevelopment
\ncosts
\n\u00a3m
\nAcquired
\nintangibles
\n(see table
\nbelow)
\n\u00a3m
\nSoftware,
\npatents and
\nintellectual
\nproperty
\n\u00a3m
\nTotal
\n\u00a3m
\nCost
\nAt 31 July 2021
1,207
156
562
177
2,102
\nForeign exchange rate movements
104
6
68
10
188
\nAdditions
\u2013
12
\u2013
6
18
\nAt 31 July 2022
1,311
174
630
193
2,308
\nForeign exchange rate movements
(45)
(2)
(31)
(3)
(81)
\nBusiness combinations
7
\u2013
13
\u2013
20
\nAdditions
\u2013
21
\u2013
7
28
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
1,273
193
612
159
2,237
\nAmortisation and impairments
\nAt 31 July 2021
59
114
287
144
604
\nForeign exchange rate movements
4
6
35
6
51
\nAmortisation charge for the year
\u2013
3
51
7
61
\nImpairment charge for the year
4
\u2013
\u2013
\u2013
4
\nAt 31 July 2022
67
123
373
157
720
\nForeign exchange rate movements
(3)
(1)
(19)
(4)
(27)
\nAmortisation charge for the year
\u2013
2
52
7
61
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
64
124
406
122
716
\nNet book value at 31 July 2023
1,209
69
206
37
1,521
\nNet book value at 31 July 2022
1,244
51
257
36
1,588
\nNet book value at 31 July 2021
1,148
42
275
33
1,498
\nIn addition to goodwill, acquired intangible assets comprise:
\nPatents,
\nlicences
\nand
\ntrademarks
\n\u00a3m
\nTechnology
\n\u00a3m
\nCustomer
\nrelationships
\n\u00a3m
\nTotal
\nacquired
\nintangibles
\n\u00a3m
\nCost
\nAt 31 July 2021
17
134
411
562
\nForeign exchange rate movements
2
18
48
68
\nAt 31 July 2022
19
152
459
630
\nForeign exchange rate movements
\u2013
(9)
(22)
(31)
\nBusiness combinations
1
2
10
13
\nAt 31 July 2023
20
145
447
612
\nAmortisation
\nAt 31 July 2021
5
67
215
287
\nForeign exchange rate movements
1
10
24
35
\nCharge for the year
2
10
39
51
\nAt 31 July 2022
8
87
278
373
\nForeign exchange rate movements
\u2013
(6)
(13)
(19)
\nCharge for the year
1
11
40
52
\nAt 31 July 2023
9
92
305
406
\nNet book value at 31 July 2023
11
53
142
206
\nNet book value at 31 July 2022
11
65
181
257
\nNet book value at 31 July 2021
12
67
196
275
\nIndividually material intangible assets comprise:
\n\u2013
\u00a353m of customer-related intangibles attributable to United Flexible (remaining amortisation
\nperiod: 4 years);
\n\u2013
\u00a348m of customer-related intangibles attributable to Morpho Detection (remaining
\namortisation period: 6 years);
\n\u2013
\u00a327m of customer-related intangibles attributable to Royal Metal (remaining amortisation
\nperiod: 5 years);
\n\u2013
\u00a324m of development cost intangibles attributable to a computed tomography programme in
\nDetection that is currently under development; and
\n\u2013
\u00a318m of development cost intangibles attributable to a X-ray diffraction programme in
\nDetection that is currently under development.
\nThe charge associated with the amortisation of intangible assets is included in operating costs on
\nthe consolidated income statement.
\n
\n
11. IMPAIRMENT TESTING
\nGOODWILL
\nGoodwill is tested for impairment at least annually or whenever there is an indication that the
\ncarrying value may not be recoverable.
\nFurther details of the impairment review process and judgements are included in the \u2018Sources
\nof\u00a0estimation uncertainty\u2019 section of the \u2018Basis of preparation\u2019 for the consolidated financial
\nstatements.
\nFor the purpose of impairment testing, assets are grouped at the lowest levels for which there
\nare separately identifiable cash-flows, known as cash generating units (CGUs), taking into
\nconsideration the commonality of reporting, policies, leadership and intra-divisional trading
\nrelationships. Goodwill acquired through business combinations is allocated to groups of CGUs at
\na divisional (or operating segment) level, being the lowest level at which management monitors
\nperformance separately.
\nThe carrying value of goodwill at 31 July is allocated by division as follows:
\n2023
\n\u00a3m
\n2023
\nNumber of
\nCGUs
\n2022
\n\u00a3m
\n2022
\nNumber of
\nCGUs
\nJohn Crane
131
1
132
1
\nSmiths Detection*
630
1
644
2
\nFlex-Tek
183
1
194
1
\nSmiths Interconnect
265
1
274
1
\n1,209
4
1,244
5
\n*
In FY2022 the Smiths Detection CGU was restructured. The Detection Russia business split into a separate CGU and
\nsubsequently fully impaired.
\nCritical estimates used in impairment testing
\nThe recoverable amount for impairment testing is determined from the higher of fair value
\nless\u00a0costs of disposal and value in use of the CGU. In assessing value in use, the estimated
\nfuture\u00a0cash-flows are discounted to their present value using a post-tax discount rate that
\nreflects\u00a0current market assessments of the time value of money, from which pre-tax discount
\nrates are determined.
\nFair value less costs of disposal is calculated using available information on past and expected
\nfuture profitability, valuation multiples for comparable quoted companies and similar
\ntransactions (adjusted as required for significant differences) and information on costs of similar
\ntransactions. Fair value less costs to sell models are used when trading projections in the
\nstrategic plan cannot be adjusted to eliminate the impact of a major restructuring.
\nThe value in use of CGUs is calculated as the net present value of the projected risk-adjusted
\ncash-flows of each CGU. These cash-flow forecasts are based on the FY2024 business plan and
\nthe five-year detailed divisional strategic projections which have been prepared by divisional
\nmanagement and approved by the Board.
\nThe principal assumptions used in determining the value in use were:
\n\u2013
Revenue: Projected sales were built up with reference to markets and product categories.
\nThey\u00a0incorporated past performance, historical growth rates and projections of developments
\nin key markets;
\n\u2013
Average earnings before interest and tax margin: Projected margins reflect historical
\nperformance, our expectations for future cost inflation and the impact of all completed projects
\nto improve operational efficiency and leverage scale. The projections did not include the impact
\nof future restructuring projects to which the Group was not yet committed;
\n\u2013
Projected capital expenditure: The cash-flow forecasts for capital expenditure were based
\non past experience and included committed ongoing capital expenditure consistent with the
\nFY2024 budget and the divisional strategic projections. The forecast did not include any future
\ncapital expenditure that improved/enhanced the operation/asset in excess of its current
\nstandard of performance;
\n\u2013
Discount rate: The discount rates have been determined with reference to illustrative weighted
\naverage cost of capital (WACC) for each CGU. In determining these discount rates, management
\nhave considered systematic risks specific to each of the Group\u2019s CGUs. These risk adjusted
\ndiscount rates have then been validated against the Group\u2019s WACC, the WACCs of the CGU\u2019s
\npeer group and an average of discount rates used by other companies for the industries in
\nwhich Smiths divisions operate. Pre-tax rates of 11.4% to 13.0% (FY2022: 11.3% to 12.3%) have
\nbeen used for the impairment testing; and
\n\u2013
Long-term growth rates: For the purposes of the Group\u2019s value in use calculations, a long-term
\ngrowth rate into perpetuity was applied immediately at the end of the five-year detailed forecast
\nperiod. CGU-specific long-term growth rates have been calculated by revenue weighting the
\nlong-term GDP growth rates of the markets that each CGU operates in. The long-term growth
\nrates used in the testing ranged from 2.2% to 2.7% (FY2022: 1.7% to 2.4%). These rates do not
\nreflect the long-term assumptions used by the Group for investment planning.
\nOf the principal assumptions above, the key assumptions that the impairment models are most
\nsensitive to are: the revenue growth assumption; the average earnings before interest and tax
\nmargin assumption; and the discount rate assumption.
\n
\n
The assumptions used in the impairment testing of CGUs with significant goodwill balances were
\nas follows:
\nAs at 31 May 2023
\nJohn Crane
\nSmiths
\nDetection
Flex-Tek
\nSmiths
\nInterconnect
\nNet book value of goodwill (\u00a3m)
135
649
191
279
\nBasis of valuation
Value in use
Value in use
Value in use
Value in use
\nDiscount rate
\u2013 pre-tax
13.0%
12.2%
11.8%
11.5%
\n\u2013 post-tax
9.7%
9.3%
9.4%
9.4%
\nPeriod covered by management projections
5 years
5 years
5 years
5 years
\nCapital expenditure \u2013 annual average over projection
\nperiod (\u00a3m)
27
27
10
20
\nRevenue \u2013 compound annual growth rate over
\nprojection period
5.3%
4.5%
3.4%
4.7%
\nAverage earnings before interest and tax margin
24.6%
14.5%
19.5%
18.6%
\nLong-term growth rates
2.7%
2.4%
2.2%
2.5%
\nAs at 31 May 2022
\nJohn Crane
\nSmiths
\nDetection
Flex-Tek
\nSmiths
\nInterconnect
\nNet book value of goodwill (\u00a3m)
132
640
187
266
\nBasis of valuation
Value in use
Value in use
Value in use
Value in use
\nDiscount rate
\u2013 pre-tax
12.3%
11.3%
11.7%
11.5%
\n\u2013 post-tax
9.1%
8.7%
9.2%
9.3%
\nPeriod covered by management projections
5 years
5 years
5 years
5 years
\nRevenue \u2013 compound annual growth rate over
\nprojection period
5.3%
3.8%
3.8%
6.0%
\nAverage earnings before interest and tax margin
24.9%
14.1%
19.7%
17.8%
\nLong-term growth rates
1.9%
2.4%
1.7%
2.1%
\nForecast earnings before interest and tax have been projected using:
\n\u2013
Expected future sales based on the strategic plan, which was constructed at a market level
\nwith input from key account managers, product line managers, business development and
\nsales teams. An assessment of the market and existing contracts/programmes was made to
\nproduce the sales forecast; and
\n\u2013
Current cost structure and production capacity, which include our expectations for future cost
\ninflation. The projections did not include the impact of future restructuring projects to which
\nthe Group was not yet committed.
\nSensitivity analysis
\nSmiths Detection is the only CGU of the Group that has limited goodwill impairment testing
\nheadroom. For all of the Group\u2019s other CGUs the recoverable amount of the CGU exceeded the
\ncarrying value, on the basis of the assumptions set out in the preceding tables and any reasonably
\npossible changes thereof.
\nThe estimated recoverable amount of the Smiths Detection CGU exceeded the carrying value by
\n\u00a3225m. Any decline in estimated value in use in excess of this amount would result in the
\nrecognition of impairment charges.
\nManagement recognise that the goodwill impairment testing headroom of the Smiths Detection
\nCGU is most sensitive to movements in the revenue growth rate, the EBIT margin and the
\ndiscount rate assumptions. Of these key assumptions, management consider that the EBIT
\nmargin assumption is the most sensitive.
\nThe Smiths Detection financial model assumes that EBIT margins grow from 11.2% in FY2023 to
\nan average of 14.5% over the five-year financial model period. This increase in EBIT margin is
\nprincipally driven by a change in revenue and profit mix, with the proportion of higher margin
\naftermarket revenue growing over the five-year projection period.
\nManagement considers that it is plausible that this margin growth may not be fully captured by
\nthe business. For the CGU to be impaired, the average EBIT margin over the five-year financial
\nmodel would have to be less than 12.3%; management recognises this to be a reasonably
\nplausible downside scenario.
\nIf the assumptions used in the impairment review were changed to a greater extent than as
\npresented in the following table, the changes would, in isolation, lead to impairment losses being
\nrecognised for the year ended 31 July 2023:
\nChange required for carrying value to equal recoverable amount \u2013 FY2023
Smiths Detection
\nRevenue \u2013 compound annual growth rate (CAGR) over five-year projection period
-460 bps decrease
\nAverage earnings before interest and tax margin
-220 bps decrease
\nPost-tax discount rate
+140 bps increase
\nChange required for carrying value to equal recoverable amount \u2013 FY2022
Smiths Detection
\nRevenue \u2013 compound annual growth rate (CAGR) over five-year projection period
-240 bps decrease
\nAverage earnings before interest and tax margin
-130 bps decrease
\nPost-tax discount rate
+70 bps increase
\nNote: Long-term growth rates are not included in the sensitivity tables above as management
\nconsider that there is no reasonably possible change in long-term growth rate that would result
\nin an impairment.
\n
\n
PROPERTY, PLANT AND EQUIPMENT, RIGHT OF USE ASSETS AND FINITE-LIFE
\nINTANGIBLE\u00a0ASSETS
\nAt each reporting period date, the Group reviews the carrying amounts of its property, plant,
\nequipment, right of use assets and finite-life intangible assets to determine whether there is any
\nindication that those assets have suffered an impairment loss.
\nThe Group has no indefinite life intangible assets other than goodwill. During the year, impairment
\ntests were carried out for capitalised development costs that have not yet started to be amortised
\nand acquired intangibles where there were indications of impairment. Value in use calculations
\nwere used to determine the recoverable values of these assets.
\n12. PROPERTY, PLANT AND EQUIPMENT
\nLand and
\nbuildings
\n\u00a3m
\nPlant and
\nmachinery
\n\u00a3m
\nFixtures,
\nfittings,
\ntools and
\nequipment
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
172
388
122
682
\nForeign exchange rate movements
14
37
6
57
\nAdditions
4
42
6
52
\nDisposals
(14)
(10)
(5)
(29)
\nAt 31 July 2022
176
457
129
762
\nForeign exchange rate movements
(6)
(14)
(2)
(22)
\nBusiness combinations
\u2013
2
\u2013
2
\nAdditions
10
33
10
53
\nDisposals
(2)
(15)
(17)
(34)
\nAt 31 July 2023
178
463
120
761
\nDepreciation
\nAt 31 July 2021
106
260
104
470
\nForeign exchange rate movements
9
25
5
39
\nCharge for the year
7
24
7
38
\nDisposals
(14)
(10)
(4)
(28)
\nAt 31 July 2022
108
299
112
519
\nForeign exchange rate movements
(4)
(8)
(2)
(14)
\nCharge for the year
8
25
9
42
\nDisposals
(2)
(14)
(17)
(33)
\nAt 31 July 2023
110
302
102
514
\nNet book value at 31 July 2023
68
161
18
247
\nNet book value at 31 July 2022
68
158
17
243
\nNet book value at 31 July 2021
66
128
18
212
\n13. RIGHT OF USE ASSETS
\nProperties
\n\u00a3m
\nVehicles
\n\u00a3m
\nEquipment
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
146
17
1
164
\nForeign exchange rate movements
12
1
\u2013
13
\nRecognition of right of use asset
18
4
\u2013
22
\nDerecognition of right of use asset
(2)
(1)
\u2013
(3)
\nAt 31 July 2022
174
21
1
196
\nForeign exchange rate movements
(6)
(1)
\u2013
(7)
\nRecognition of right of use asset
27
7
1
35
\nDerecognition of right of use asset
(5)
\u2013
\u2013
(5)
\nAt 31 July 2023
190
27
2
219
\nDepreciation
\nAt 31 July 2021
46
10
\u2013
56
\nForeign exchange rate movements
5
1
\u2013
6
\nCharge for the year
25
5
\u2013
30
\nDerecognition of right of use asset
(1)
(1)
\u2013
(2)
\nAt 31 July 2022
75
15
\u2013
90
\nForeign exchange rate movements
(4)
\u2013
\u2013
(4)
\nCharge for the year
27
4
1
32
\nDerecognition of right of use asset
(4)
\u2013
\u2013
(4)
\nAt 31 July 2023
94
19
1
114
\nNet book value at 31 July 2023
96
8
1
105
\nNet book value at 31 July 2022
99
6
1
106
\nNet book value at 31 July 2021
100
7
1
108
\n
\n
14. FINANCIAL ASSETS \u2013 OTHER INVESTMENTS
\nInvestment in
\nICU Medical,
\nInc equity
\n\u00a3m
\nDeferred
\ncontingent
\nconsideration
\n\u00a3m
\nInvestments
\nin early stage
\nbusinesses
\n\u00a3m
\nCash
\ncollateral
\ndeposit
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
\u2013
\u2013
7
4
11
\nForeign exchange rate movements
\u2013
\u2013
1
\u2013
1
\nAdditions
426
30
4
\u2013
460
\nDisposal
\u2013
\u2013
(4)
\u2013
(4)
\nFair value change through profit and loss
\u2013
(11)
1
\u2013
(10)
\nFair value change through other
\ncomprehensive income
(62)
\u2013
(1)
\u2013
(63)
\nAt 31 July 2022
364
19
8
4
395
\nFair value change through profit and loss
\u2013
(6)
\u2013
\u2013
(6)
\nFair value change through other
\ncomprehensive income
(17)
\u2013
(1)
\u2013
(18)
\nAt 31 July 2023
347
13
7
4
371
\nFollowing the sale of Smiths Medical the Group has recognised a financial asset for its investment
\nin 10% of the equity in ICU Medical, Inc (ICU) and a financial asset for the fair value of US$100m
\nadditional sales consideration that is contingent on the future share price performance of ICU.
\nThe Group\u2019s investments in early-stage businesses are in businesses that are developing or
\ncommercialising related technology. Cash collateral deposits represent amounts held on deposit
\nwith banks as security for liabilities or letters of credit.
\n15. INVENTORIES
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nRaw materials and consumables
201
187
\nWork in progress
130
106
\nFinished goods
306
277
\nTotal inventories
637
570
\nIn FY2023, operating costs included \u00a31,622m (FY2022: \u00a31,323m) of inventory consumed, \u00a326m
\n(FY2022: \u00a312m) was charged for the write-down of inventory and \u00a316m (FY2022: \u00a312m) was
\nreleased from provisions no longer required.
\nINVENTORY PROVISIONING
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nGross inventory carried at full value
545
492
\nGross value of inventory partly or fully provided for
158
131
\n703
623
\nInventory provision
(66)
(53)
\nInventory after provisions
637
570
\n16. TRADE AND OTHER RECEIVABLES
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNon-current
\nTrade receivables
2
1
\nContract assets
65
58
\nOther receivables
8
10
\n75
69
\nCurrent
\nTrade receivables
493
506
\nPrepayments
40
33
\nContract assets
121
127
\nOther receivables
118
72
\n772
738
\nTrade receivables do not carry interest. Management considers that the carrying value of trade
\nand other receivables approximates to the fair value. Trade and other receivables, including
\naccrued income and other receivables qualifying as financial instruments are accounted for at
\namortised cost. The maximum credit exposure arising from these financial assets was \u00a3744m
\n(FY2022:\u00a0\u00a3726m).
\n
\n
Contract assets comprise unbilled balances not yet due on contracts, where revenue recognition
\ndoes not align with the agreed payment schedule. The main movements in the year arose from
\nincreases in contract asset balances of \u00a319m (FY2022: \u00a319m) principally within Smiths
\nInterconnect and Smiths Detection, offset by \u00a39m decreases in John Crane and \u00a37m (FY2022:
\n\u00a315m) decrease due to foreign currency translation losses.
\nA number of Flex-Tek\u2019s and Interconnect\u2019s customers provide supplier finance schemes which
\nallow their suppliers to sell trade receivables, without recourse, to banks. This is commonly
\nknown as invoice discounting or factoring. During FY2023 the Group collected \u00a3128m of
\nreceivables through these schemes (FY2022: \u00a392m). The impact of invoice discounting on the
\nFY2023 balance sheet was that trade receivables were reduced by \u00a326m (2022: \u00a319m). Costs of
\ndiscounting were \u00a32m (FY2022: less than \u00a31m), charged to the income statement within financing
\ncosts. The cash received via these schemes was classified as an operating cash inflow as it had
\narisen from operating activities.
\nTrade receivables are disclosed net of provisions for expected credit loss, with historical write-
\noffs used as a basis, adjusted for factors that are specific to the debtor, general economic
\nconditions of the industry in which the debtor operates and a default risk multiplier applied to
\nreflect country risk premium. Credit risk is managed separately for each customer and, where
\nappropriate, a credit limit is set for the customer based on previous experience of the customer
\nand third-party credit ratings. The Group has no significant concentration of credit risk, with
\nexposure spread over a large number of customers. The largest single customer was the US
\nFederal Government, representing 7% (FY2022: 7%) of Group revenue.
\nAGEING OF TRADE RECEIVABLES
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nTrade receivables which are not yet due
389
396
\nTrade receivables which are between 1-30 days overdue
52
51
\nTrade receivables which are between 31-60 days overdue
19
24
\nTrade receivables which are between 61-90 days overdue
12
11
\nTrade receivables which are between 91-120 days overdue
8
7
\nTrade receivables which are more than 120 days overdue
45
54
\n525
543
\nExpected credit loss allowance provision
(30)
(36)
\nTrade receivables
495
507
\nMovement in expected credit loss allowance
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nBrought forward loss allowance at the start of the period
36
32
\nExchange adjustments
(1)
4
\nIncrease in allowance recognised in the income statement
4
8
\nAmounts written off or recovered during the year
(9)
(8)
\nCarried forward loss allowance at the end of the year
30
36
\n17. TRADE AND OTHER PAYABLES
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNon-current
\nOther payables
13
13
\nContract liabilities
27
33
\n40
46
\nCurrent
\nTrade payables
247
282
\nOther payables
51
57
\nOther taxation and social security costs
66
30
\nAccruals
200
183
\nContract liabilities
159
130
\n723
682
\nTrade and other payables, including accrued expenses and other payables qualifying as financial
\ninstruments, are accounted for at amortised cost and are categorised as \u201cTrade and other
\nfinancial payables\u201d in note 21.
\nContract liabilities comprise deferred income balances of \u00a3186m (FY2022: \u00a3163m) in respect of
\npayments being made in advance of revenue recognition. The movement in the year arises
\nprimarily from the long-term contracts of the Smiths Detection division where invoicing under
\nmilestones precedes the delivery of the programme performance obligations. Revenue
\nrecognised in the year includes \u00a397m (FY2022: \u00a3113m) that was included in the opening contract
\nliabilities balance. This revenue primarily relates to the delivery of performance obligations in the
\nSmiths Detection business.
\n
\n
18. BORROWINGS AND NET DEBT
\nThis note sets out the calculation of net debt, an important measure in explaining our
\nfinancing\u00a0position. Net debt includes accrued interest and fair value adjustments relating to
\nhedge\u00a0accounting.
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash and cash equivalents
\nNet cash and deposits
285
1,056
\nShort-term borrowings
\n\u20ac600m 1.25% Eurobond 2023
\u2013
(502)
\nOverdrafts
\u2013
(1)
\nLease liabilities
(26)
(29)
\nInterest accrual
(3)
(6)
\n(29)
(538)
\nLong-term borrowings
\n\u20ac650m 2.00% Eurobond 2027
(534)
(538)
\nLease liabilities
(91)
(90)
\n(625)
(628)
\nBorrowings/gross debt
(654)
(1,166)
\nDerivatives managing interest rate risk and currency profile of the debt
(18)
(40)
\nNet debt
(387)
(150)
\nCASH AND CASH EQUIVALENTS
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash at bank and in hand
175
242
\nShort-term deposits
110
814
\nCash and cash equivalents
285
1,056
\nCash and cash equivalents include highly liquid investments with maturities of three months or
\nless. Borrowings are accounted for at amortised cost and are categorised as other financial
\nliabilities. See note 18 for a maturity analysis of\u00a0borrowings. Interest of \u00a317m (FY2022:\u00a0\u00a330m) was
\ncharged to the consolidated income statement in the period in respect of public bonds.
\nANALYSIS OF FINANCIAL DERIVATIVES ON BALANCE SHEET
\nNon-current
\nassets
\n\u00a3m
\nCurrent
\nassets
\n\u00a3m
\nCurrent
\nliabilities
\n\u00a3m
\nNon-current
\nliabilities
\n\u00a3m
\nNet balance
\n\u00a3m
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
\u2013
(18)
(18)
\nForeign exchange forward contracts
\u2013
5
(2)
\u2013
3
\nAt 31 July 2023
\u2013
5
(2)
(18)
(15)
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
(20)
(20)
(40)
\nForeign exchange forward contracts
\u2013
4
(7)
\u2013
(3)
\nAt 31 July 2022
\u2013
4
(27)
(20)
(43)
\nMOVEMENTS IN ASSETS/(LIABILITIES) ARISING FROM FINANCING ACTIVITIES
\nChanges in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\nForeign exchange
\ngains/(losses)
(10)
(21)
(10)
\u2013
(41)
(4,031)
(4,072)
\nNet cash inflow
\nfrom continuing
\noperations
(761)
564
\u2013
8
(189)
4,031
3,842
\nNet movement
\nfrom new leases
\nand modifications
\u2013
(34)
\u2013
\u2013
(34)
\u2013
(34)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
(2)
16
\u2013
14
\u2013
14
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
14
14
6
20
\nInterest expense
\ntaken to income
\nstatement*
\u2013
28
\u2013
\u2013
28
\u2013
28
\nInterest paid
\u2013
(29)
\u2013
\u2013
(29)
\u2013
(29)
\nReclassifications
\u2013
3
(3)
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2023
285
(29)
(625)
(18)
(387)
3
(384)
\n*
The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\n
\n
\n
Changes in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2021
405
(36)
(1,466)
75
(1,022)
1
(1,021)
\nForeign exchange
\ngains/(losses)
62
(3)
4
\u2013
63
(6,799)
(6,736)
\nNet cash inflow
\nfrom continuing
\noperations*
589
34
295
\u2013
918
6,799
7,717
\nNet movement
\nfrom lease
\nmodifications
\u2013
(22)
\u2013
\u2013
(22)
\u2013
(22)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
2
27
\u2013
29
\u2013
29
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
(115)
(115)
(4)
(119)
\nInterest expense
\ntaken to income
\nstatement**
\u2013
(35)
\u2013
\u2013
(35)
\u2013
(35)
\nInterest paid
\u2013
\u2013
34
\u2013
34
\u2013
34
\nReclassifications
\u2013
(478)
478
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\n*
In FY22, the net cash inflow for the total Group including discontinued operations was \u00a3589m, \u00a357m of which related to
\nthe cash held by Smiths Medical at the time of disposal.
\n** The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\nCASH POOLING
\nCash and overdraft balances in interest compensation cash pooling systems are reported gross
\non the balance sheet. The cash pooling agreements incorporate a legally enforceable right of
\nnet\u00a0settlement. However, as there is no intention to settle the balances net, these arrangements
\ndo not qualify for net presentation. At 31 July 2023 the total value of overdrafts on accounts in
\ninterest compensation cash pooling systems was \u00a3nil (FY2022: \u00a3nil). The balances held in zero
\nbalancing cash pooling arrangements have daily settlement of balances. Therefore netting is
\nnot\u00a0relevant.
\nCHANGE OF CONTROL
\nThe Company has in place credit facility agreements under which a change of control would
\ntrigger prepayment clauses. The Company has one bond in issue, the terms of which would allow
\nbondholders to exercise put options and require the Company to buy back the bonds at their
\nprincipal amount plus interest if a rating downgrade occurs at the same time as a change of
\ncontrol takes effect.
\nLEASE LIABILITIES
\nLease liabilities have been measured at the present value of the remaining lease payments.
\nThe\u00a0weighted average incremental borrowing rate applied to lease liabilities in FY2023 was 4.01%
\n(FY2022: 3.63%).
\n19. FINANCIAL RISK MANAGEMENT
\nThe Group\u2019s international operations and debt financing expose it to financial risks which include
\nthe effects of changes in foreign exchange rates, debt market prices, interest rates, credit risks
\nand liquidity risks. The management of operational credit risk is discussed in note 16.
\nTREASURY RISK MANAGEMENT POLICY
\nThe Board maintains a Treasury Risk Management Policy, which governs the treasury operations
\nof the Group and its subsidiary companies and the consolidated financial risk profile to be
\nmaintained. A report on treasury activities, financial metrics and compliance with the Policy is
\ncirculated to the Chief Financial Officer each month and key elements to the Audit & Risk
\nCommittee on a semi-annual basis.
\nThe Policy maintains a treasury control framework within which counterparty risk, financing
\nand\u00a0debt strategy, cash and liquidity, interest rate risk and currency translation management
\nare\u00a0reserved for Group Treasury, while currency transaction management is devolved to
\noperating divisions.
\nCentrally directed cash management systems exist globally to manage overall liquid resources
\nefficiently across the divisions. The Group uses financial instruments to raise financing for its
\nglobal operations, to manage related interest rate and currency financial risk, and to hedge
\ntransaction risk within subsidiary companies.
\nThe Group does not speculate in financial instruments. All financial instruments hedge existing
\nbusiness exposures and all are recognised on the balance sheet.
\nThe Policy defines four treasury risk components and for each component a set of financial
\nmetrics to be measured and reported monthly against pre-agreed objectives.
\n1) Credit quality
\nThe Group\u2019s strategy is to maintain a solid investment-grade rating to ensure access to the widest
\npossible sources of financing at the right time and to optimise the resulting cost of debt capital.
\nThe credit ratings at the end of July 2023 were BBB+ / Baa2 (both stable) from Standard & Poor\u2019s
\nand Moody\u2019s respectively. An essential element of an investment-grade rating is consistent and
\nrobust cash-flow metrics. The Group\u2019s objective is to maintain a net debt/headline EBITDA ratio of
\ntwo times or lower over the medium term. Capital management is discussed in more detail in
\nnote 26.
\n2) Debt and interest rate
\nThe Group\u2019s risk management objectives are to ensure that the majority of funding is drawn from
\nthe public debt markets with the average maturity profile of gross debt to be at or greater than
\nthree years, and between 40-60% of gross debt (excluding leases) is at fixed rates. At 31 July 2023
\nthese measures were 100% (FY2022: 100%), 3.6 years (FY2022: 2.7 years) and 54% (FY2022: 44%).
\n
\n
\n
The Group has no financial covenants in its external debt agreements. Interest rate risk
\nmanagement is discussed in note 19(b).
\n3) Liquidity management
\nThe Group\u2019s objective is to ensure that at any time undrawn committed facilities, net of short-
\nterm overdraft financing, are at least \u00a3300m and that committed facilities have at least 12 months
\nto run until maturity. At 31 July 2023, these measures were \u00a3622m (FY2022: \u00a3657m) and 57
\nmonths (FY2022: 27 months). At 31 July 2023, net cash resources were \u00a3285m (FY2022: \u00a31,055m).
\nLiquidity risk management is discussed in note 19(d).
\n4) Currency management
\nThe Group is an international business with the majority of its net assets denominated in foreign
\ncurrency. It protects the balance sheet and reserves from adverse foreign exchange movements
\nby financing foreign currency assets where appropriate in the same currency. The Group\u2019s
\nobjective for managing transaction currency exposure is to reduce medium-term volatility to
\ncash-flow, margins and earnings. Foreign exchange risk management is discussed in note 19(a)
\nbelow.
\n(A) FOREIGN EXCHANGE RISK
\nTransactional currency exposure
\nThe Group is exposed to foreign currency risks arising from sales or purchases by businesses in
\ncurrencies other than their functional currency. It is Group policy that, when the net foreign
\nexchange exposure to known future sales and purchases is material, this exposure is hedged
\nusing forward foreign exchange contracts. The net exposure is calculated by adjusting the
\nexpected cash-flow for payments or receipts in the same currency linked to the sale or purchase.
\nThis policy minimises the risk that the profits generated from the transaction will be affected by
\nforeign exchange movements which occur after the price has been determined. Hedge accounting
\ndocumentation and effectiveness testing are only undertaken if it is cost-effective.
\nThe following table shows the currency of financial instruments. It excludes loans and derivatives
\ndesignated as net investment hedges.
\nAt 31 July 2023
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
43
372
127
184
726
\nFinancial instruments included in trade and
\nother payables
(64)
(216)
(93)
(103)
(476)
\nCash and cash equivalents
50
115
29
91
285
\nBorrowings not designated as net investment
\nhedges
(27)
(54)
(12)
(24)
(117)
\n2
217
51
148
418
\nExclude balances held in operations with the
\nsame functional currency.
(7)
(287)
(57)
(153)
(504)
\nExposure arising from intra-Group loans
\u2013
127
28
(73)
82
\nFuture forward foreign exchange contract
\ncash-flows
(63)
(23)
(48)
133
(1)
\n(68)
34
(26)
55
(5)
\nAt 31 July 2022
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
41
423
114
169
747
\nFinancial instruments included in trade and
\nother payables
(52)
(239)
(98)
(101)
(490)
\nCash and cash equivalents
355
506
74
120
1,055
\nBorrowings not designated as net investment
\nhedges
(28)
(58)
(14)
(19)
(119)
\n316
632
76
169
1,193
\nExclude balances held in operations with the
\nsame functional currency.
(322)
(149)
(80)
(142)
(693)
\nExposure arising from intra-Group loans
\u2013
(419)
(27)
(89)
(535)
\nFuture forward foreign exchange contract
\ncash-flows
(42)
(40)
(38)
120
\u2013
\n(48)
24
(69)
58
(35)
\nFinancial instruments included in trade and other receivables comprise trade receivables,
\naccrued income and other receivables which qualify as financial instruments. Similarly, financial
\ninstruments included in trade and other payables comprise trade payables, accrued expenses
\nand other payables that qualify as financial instruments.
\n
\n
\n
Based on the assets and liabilities held at the year-end, if the specified currencies were to
\nstrengthen 10% while all other market rates remained constant, the change in the fair value of
\nfinancial instruments not designated as net investment hedges would have the following\u00a0effect:
\nImpact on
\nprofit
\nfor the year
\nFY2023
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2023
\n\u00a3m
\nImpact on
\nprofit
\nfor the year
\nFY2022
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2022
\n\u00a3m
\nUS dollar
\u2013
1
(3)
1
\nEuro
1
\u2013
8
(1)
\nSterling
\u2013
(1)
4
\u2013
\nThese sensitivities were calculated before adjusting for tax and exclude the effect of quasi-equity
\nintra-Group loans.
\nCash-flow hedging
\nThe Group uses forward foreign exchange contracts to hedge future foreign currency sales and
\npurchases. At 31 July 2023, contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) were
\ndesignated as hedging instruments. In addition, the Group had outstanding foreign currency
\ncontracts with a nominal value of \u00a3252m (FY2022: \u00a3226m) which were being used to manage
\ntransactional foreign exchange exposures, but were not accounted for as cash-flow hedges. The
\nfair value of the contracts is disclosed in note 20.
\nThe majority of hedged transactions will be recognised in the consolidated income statement in
\nthe same period that the cash-flows are expected to occur, with the only differences arising
\nbecause of normal commercial credit terms on sales and purchases. It is the Group\u2019s policy to
\nhedge 80% of certain exposures for the next two years and 50% of highly probable exposures for
\nthe next 12 months.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The foreign exchange forward contracts have similar
\ncritical terms to the hedged items, such as the notional amounts and maturities. Therefore, there
\nis an economic relationship and the hedge ratio is established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\nGroup\u2019s and the counterparty credit risks on the fair value of the foreign exchange forward
\ncontracts, which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs. Of the foreign exchange contracts designated
\nas hedging instruments, 98% are for periods of 12 months or less (FY2022: 98%).
\nThe following table presents a reconciliation by risk category of the cash-flow hedge reserve and
\nanalysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward cash-flow hedge reserve at start of year
(3)
2
\nForeign exchange forward contracts:
Net fair value gains on effective hedges
1
(6)
\nAmount reclassified to income statement
\n\u2013 finance costs
2
1
\nCarried forward cash-flow hedge reserve at end of year
\u2013
(3)
\nThe following tables set out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the cash-flow hedge reserve:
\nHedged item
Hedged exposure
Hedging instrument
\nFinancial
\nyear
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCash-flow hedge
\nreserve
\n\u00a3m
\nSales and
\npurchases
\nForeign
\ncurrency risk
\nForeign exchange
\ncontracts
\nFY2023
1
(1)
1
\nFY2022
(6)
6
(6)
\nCash-flow hedges generated \u00a3nil of ineffectiveness in FY2023 (FY2022: \u00a3nil) which was
\nrecognised in the income statement through finance costs.
\nTranslational currency exposure
\nThe Group has significant investments in overseas operations, particularly in the US and Europe.\u00a0As
\na result, the sterling value of the Group\u2019s balance sheet can be significantly affected by\u00a0movements
\nin exchange rates. The Group seeks to mitigate the effect of these translational currency exposures
\nby matching the net investment in overseas operations with borrowings denominated in their
\nfunctional currencies, except where significant adverse interest differentials or other factors would
\nrender the cost of such hedging activity uneconomic. This is achieved by borrowing primarily in the
\nrelevant currency or in some cases indirectly using cross-currency swaps.
\nNet investment hedges
\nThe table below sets out the currency of loans and swap contracts designated as net investment
\nhedges:
\nAt 31 July 2023
At 31 July 2022
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nLoans designated as net
\ninvestment hedges
\u2013
(293)
(293)
\u2013
(451)
(451)
\nCross-currency swap
(247)
\u2013
(247)
(615)
\u2013
(615)
\n(247)
(293)
(540)
(615)
(451)
(1,066)
\n
\n
\n
At 31 July 2023, cross-currency swaps hedged the Group\u2019s exposure to US dollars and euros
\n(31\u00a0July 2022: US dollars and euros). All the cross-currency swaps designated as net investment
\nhedges were non-current (FY2022: current and non-current). Swaps generating \u00a3247m of the US
\ndollar exposure (FY2022: \u00a3261m) will mature in February 2027.
\nIn addition, non-swapped borrowings were also used to hedge the Group\u2019s exposure to euros
\n(31\u00a0July 2022: US dollars and euros). Borrowings generating \u00a3293m of the euro exposure
\n(FY2022: \u00a3287m) will mature in February\u00a02027.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The swaps and borrowings have the same notional
\namount as the hedged items and, therefore, there is an economic relationship with the hedge
\nratio established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\ncounterparty and the Group\u2019s own credit risk on the fair value of the foreign exchange forward
\ncontracts which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs.
\nThe following table presents a reconciliation by risk category of the net investment hedge reserve
\nand analysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward net investment hedge reserve at start of year
(207)
(238)
\nCross-currency swaps *
Net fair value gains on effective hedges
40
(77)
\nBonds
Net fair value gains on effective hedges
(29)
5
\nAmounts removed from the hedge
\nreserve and recognised in the income
\nstatement
Profit/(loss) on business disposal
\u2013
103
\nCarried forward net investment hedge reserve at end of year
(196)
(207)
\n*
The FY2022 reported amount for net fair value losses on effective hedges of cross-currency swaps was incorrectly
\npresented as \u00a382m rather than \u00a377m. The total reserve balances and net assets for FY2022 are not impacted by the
\ncorrection to this table.
\nThe following table sets out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the net investment hedge reserve as
\nat 31 July 2022 and 31 July 2021:
\nHedged item
Hedged exposure
Hedging instrument
Financial year
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nNet investment
\nhedge\u00a0reserve
\n\u00a3m
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2023
(40)
40
40
\nBonds
FY2023
29
(29)
(29)
\n(11)
11
11
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2022
82
(82)
(82)
\nBonds
FY2022
(5)
5
5
\n77
(77)
(77)
\nNet investment hedges generated \u00a31m of ineffectiveness in FY2022 (FY2022: \u00a31m) which was
\nrecognised in the income statement through finance costs.
\nThe fair values of these net investment hedges are subject to exchange rate movements.
\nBased\u00a0on the hedging instruments in place at\u00a0the\u00a0year-end, if the specified currencies
\nwere\u00a0to\u00a0strengthen 10% while all other market rates remained constant, it would have the
\nfollowing effect:
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2023
\n\u00a3m
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2022
\n\u00a3m
\nUS dollar
27
68
\nEuro
33
50
\nThese movements would be fully offset by an opposite movement on the retranslation of the net
\nassets of the overseas subsidiaries. These sensitivities were calculated before adjusting for tax.
\n(B) INTEREST RATE RISK
\nThe Group operates an interest rate policy designed to optimise interest cost and reduce volatility
\nin reported earnings. The Group\u2019s current policy is to require interest rates to be fixed within a band
\nof between 40% and 60 % of the level of gross debt (excluding leases). This is achieved through fixed
\nrate borrowings and interest rate swaps. At 31 July 2023 54% (FY2022: 44%) of the Group\u2019s gross
\nborrowings (excluding leases) were at fixed interest rates, after adjusting for interest rate swaps
\nand the impact of short maturity derivatives designated as net investment hedges.
\nThe Group monitors its fixed rate risk profile against both gross and net debt. For medium-term
\nplanning, it focuses on gross debt to eliminate the fluctuations of variable cash levels over the
\ncycle. The weighted average interest rate on borrowings and cross-currency swaps at 31 July
\n2023, after interest rate swaps, was 4.53% (FY2022: 3.06%).
\n
\n
\n
Interest rate profile of financial assets and liabilities and the fair value of borrowings
\nThe following table shows the interest rate risk exposure of investments, cash and borrowings,
\nwith the borrowings adjusted for the impact of interest rate hedging. Other financial assets and
\nliabilities do not earn or bear interest, and for all financial instruments except borrowings, the
\ncarrying value is not materially different from their fair value.
\nAs at 31 July 2023
\nAt fair value
\nthrough
\nprofit or loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(29)
(29)
\nBetween one and five years
\u2013
\u2013
(365)
(347)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(418)
(400)
\nFloating rate interest financial assets/(liabilities)
4
215
(236)
(240)
\nTotal interest-bearing financial assets/(liabilities)
4
215
(654)
(640)
\nNon-interest-bearing assets in the same category
\u2013
70
\u2013
\u2013
\nTotal
4
285
(654)
(640)
\nAs at 31 July 2022
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(203)
(203)
\nBetween one and five years
\u2013
\u2013
(357)
(359)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(584)
(586)
\nFloating rate interest financial assets/(liabilities)*
4
970
(582)
(586)
\nTotal interest-bearing financial assets/(liabilities)
4
970
(1,166)
(1,172)
\nNon-interest-bearing assets in the same category
\u2013
86
\u2013
\u2013
\nTotal
4
1,056
(1,166)
(1,172)
\n*
Floating rate interest financial assets in the prior year have been amended to remove the investments in ICU Medical
\nInc., contingent consideration and investments in early-stage business that were incorrectly reported as having
\ninterest rate exposure.
\nInterest rate hedging
\nThe Group also has exposures to the fair values of non-derivative financial instruments such as
\nEUR fixed rate borrowings. To manage the risk of changes in these fair values, the Group has
\nentered into fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which
\nfor accounting purposes are designated as fair value hedges.
\nAt 31 July 2023 and 31 July 2022, the Group had designated the following hedges against
\nvariability in the fair value of borrowings arising from fluctuations in base rates:
\n\u2013
\u20ac300m of the fixed/floating and \u20ac exchange exposure of EUR/USD interest rate swaps
\nmaturing on 23 February 2027 partially hedging the \u20ac 2027 Eurobond; and
\n\u2013
\u20ac400m of the fixed/floating element of the EUR/USD interest rate swaps that partially hedged
\nthe \u20ac 2023 Eurobond was repaid on 28 April 2022.
\nThe fair values of the hedging instruments are disclosed in note 20. The effect of the swaps was to
\nconvert \u00a3257m (FY2022: \u00a3588m) debt from fixed rate to floating rate. The swaps have similar
\ncritical terms to the hedged items, such as the reference rate, reset dates, notional amounts,
\npayment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is
\nestablished as 1:1. Hedge effectiveness is determined at the inception of the hedge relationship,
\nand through periodic prospective effectiveness assessments to ensure that an economic
\nrelationship exists between the hedged item and hedging instrument.
\nThe main source of hedge ineffectiveness in these hedging relationships is the effect of the
\ncurrency basis risk on cross-currency interest rate swaps which are not reflected in the fair value
\nof the hedged item. No other sources of ineffectiveness emerged from these hedging
\nrelationships. Any hedge ineffectiveness was recognised immediately in the income statement in
\nthe period in which it occurred.
\n
\n
\n
The following table sets out the details of the hedged exposures covered by the Group\u2019s fair value hedges:
\nHedged item
Hedged exposure
Financial year
\nChanges in value
\nof hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCarrying amount
\nAccumulated fair value
\nadjustments on hedged item
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nFixed rate bonds (a)
\nInterest rate risk
FY2023
(2)
2
\u2013
\u2013
\u2013
\u2013
\nInterest rate & currency rate risk
FY2023
16
(16)
\u2013
233
\u2013
(21)
\n14
(14)
\u2013
233
\u2013
(21)
\nFixed rate bonds (a)
\nInterest rate risk
FY2022
8
(8)
\u2013
336
\u2013
(2)
\nInterest rate & currency rate risk
FY2022
21
(20)
\u2013
252
\u2013
(5)
\n29
(28)
\u2013
588
\u2013
(7)
\n(a) Classified as borrowings.
\nFair value hedges generated a \u00a3nil ineffectiveness in FY2023 (FY2022: \u00a31m) which was recognised
\nin the income statement through finance costs.
\nSensitivity of interest charges to interest rate movements
\nThe Group has exposure to sterling, US dollar and euro interest rates. However, the Group does
\nnot have a significant exposure to interest rate movements for any individual currency. Based on
\nthe composition of net debt and investments at 31 July 2023, and taking into consideration all fixed
\nrate borrowings and interest rate swaps in place, a one percentage point (100 basis points)
\nchange in average floating interest rates for all three currencies would have a \u00a32m impact
\n(FY2022: \u00a32m impact) on the Group\u2019s profit before tax.
\n(C) FINANCIAL CREDIT RISK
\nThe Group is exposed to credit-related losses in the event of non-performance by counterparties
\nto financial instruments, but does not currently expect any counterparties to fail to meet their
\nobligations. Credit risk is mitigated by the Board-approved policy of only placing cash deposits
\nwith highly rated relationship bank counterparties within counterparty limits established by
\nreference to their Standard & Poor\u2019s long-term debt rating. In the normal course of business, the
\nGroup operates cash pooling systems, where a legal right of set-off applies.
\nThe maximum credit risk exposure in the event of other parties failing to perform their obligations
\nunder financial assets, excluding trade and other receivables and derivatives, totals \u00a3295m at 31
\nJuly 2023 (FY2022: \u00a31,067m).
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash in AAA liquidity funds
78
551
\nCash at banks with at least a AA- credit rating
31
104
\nCash at banks with all other A credit ratings
170
397
\nCash at other banks
6
4
\nInvestments in bank deposits
4
4
\nOther investments
7
7
\n296
1,067
\nAt 31 July 2023, the maximum exposure with a single bank for deposits and cash was \u00a365m
\n(FY2022: \u00a3339m). The bank has a credit rating of A+. The maximum mark to market exposure with
\na single bank for derivatives was out of the money in both the current and prior year and does not
\nrepresent a credit risk.
\n
\n
\n
(D) LIQUIDITY RISK
\nBorrowing facilities
\nBoard policy specifies the maintenance of unused committed credit facilities of at least \u00a3300m at
\nall times to ensure that the Group has sufficient available funds for operations and planned
\ndevelopment. The\u00a0Group has Revolving Credit Facilities of US$800m maturing 5 May 2028. At\u00a0the
\nbalance sheet date, the Group had the following undrawn credit facilities:
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nExpiring after more than four years (FY 2022: two years)
622
657
\nCash deposits
\nAs at 31 July 2023, \u00a3110m (FY2022: \u00a3814m) of cash and cash equivalents was on deposit with
\nvarious banks of which \u00a378m (FY2022: \u00a3558m) was in liquidity funds. \u00a34m (FY2022: \u00a34m) of
\ninvestments comprised bank deposits held to secure liabilities and letters of credit.
\nGross contractual cash-flows for borrowings
\nAs at 31 July 2023
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(29)
\u2013
(11)
(40)
\nBetween one and two years
(27)
\u2013
(11)
(38)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(13)
\u2013
(11)
(24)
\nBetween four and five years
(561)
21
\u2013
(540)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(674)
21
(44)
(697)
\nAs at 31 July 2022
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(539)
2
(17)
(554)
\nBetween one and two years
(23)
\u2013
(11)
(34)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(14)
\u2013
(11)
(25)
\nBetween four and five years
(552)
5
(11)
(558)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(1,172)
7
(61)
(1,226)
\nThe figures presented in the borrowings column include the non-cash adjustments which are
\nhighlighted in the adjacent column. The contractual interest reported for borrowings is before the
\neffect of interest rate swaps.
\nGross contractual cash-flows for derivative financial instruments
\nAs at 31 July 2023
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
209
(204)
5
\nGreater than one year
6
(6)
\u2013
\nLiabilities
\nLess than one year
159
(161)
(2)
\nGreater than one year
252
(270)
(18)
\nTotal
626
(641)
(15)
\nAs at 31 July 2022
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
495
(521)
(26)
\nGreater than one year
270
(290)
(20)
\nLiabilities
\nLess than one year
212
(209)
3
\nGreater than one year
8
(8)
\u2013
\nTotal
985
(1,028)
(43)
\nThis table above presents the undiscounted future contractual cash-flows for all derivative
\nfinancial instruments. For this disclosure, cash-flows in foreign currencies are translated using
\nthe spot rates at the balance sheet date. The fair values of these financial instruments are
\npresented in note 20.
\nGross contractual cash-flows for other financial liabilities
\nThe contractual cash-flows for financial liabilities included in trade and other payables were
\n\u00a3463m (FY2022: \u00a3474m) due in less than one year, \u00a313m (FY2022: \u00a313m) due between one and
\nfive years.
\n
\n
\n
20. DERIVATIVE FINANCIAL INSTRUMENTS
\nThe tables below set out the nominal amount and fair value of derivative contracts held by the
\nGroup, identifying the derivative contracts which qualify for hedge accounting treatment.
\nAt 31 July 2023
\nContract or
\nunderlying
\nnominal
\namount
\n\u00a3m
\nFair value
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nNet
\n\u00a3m
\nForeign exchange contracts (cash-flow hedges)
123
1
(1)
\u2013
\nForeign exchange contracts (not hedge accounted)
252
4
(1)
3
\nTotal foreign exchange contracts
375
5
(2)
3
\nCross-currency swaps (fair value and net investment
\nhedges)
247
\u2013
(18)
(18)
\nTotal financial derivatives
622
5
(20)
(15)
\nBalance sheet entries:
\nNon-current
256
\u2013
(18)
(18)
\nCurrent
366
5
(2)
3
\nTotal financial derivatives
622
5
(20)
(15)
\nAt 31 July 2022
\nContract or
\nunderlying
\nnominal
\namount
\n\u00a3m
\nFair value
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nNet
\n\u00a3m
\nForeign exchange contracts (cash-flow hedges)
141
3
(5)
(2)
\nForeign exchange contracts (not hedge accounted)
226
1
(2)
(1)
\nTotal foreign exchange contracts
367
4
(7)
(3)
\nCross-currency swaps (fair value and net investment
\nhedges)
615
\u2013
(40)
(40)
\nTotal financial derivatives
982
4
(47)
(43)
\nBalance sheet entries:
\nNon-current
269
\u2013
(20)
(20)
\nCurrent
713
4
(27)
(23)
\nTotal financial derivatives
982
4
(47)
(43)
\nACCOUNTING FOR OTHER DERIVATIVE CONTRACTS
\nAny foreign exchange contracts which are not formally designated as hedges and tested are
\nclassified as \u2018held for trading\u2019 and not hedge\u00a0accounted.
\nNETTING
\nInternational Swaps and Derivatives Association (ISDA) master netting agreements are in place
\nwith derivative counterparties except for contracts traded on a dedicated international electronic
\ntrading platform used for operational foreign exchange hedging. Under these agreements if a
\ncredit event occurs, all outstanding transactions under the ISDA are terminated and only a single
\nnet amount per counterparty is payable in settlement of all transactions. The ISDA agreements
\ndo not meet the criteria for offsetting, since the offsetting is enforceable only if specific events
\noccur in the future, and there is no intention to settle the contracts on a net basis.
\nAssets
\n31 July 2023
\n\u00a3m
\nLiabilities
\n31 July 2023
\n\u00a3m
\nAssets
\n31 July 2022
\n\u00a3m
\nLiabilities
\n31 July 2022
\n\u00a3m
\nGross value of assets and liabilities
5
(20)
4
(47)
\nRelated assets and liabilities subject to master netting
\nagreements
(5)
5
(4)
4
\nNet exposure
\u2013
(15)
\u2013
(43)
\n
\n
\n
The maturity profile, average interest and foreign currency exchange rates of the hedging instruments used in the Group\u2019s hedging strategies are as follows:
\nHedged exposure
Hedging instrument
\nMaturity at 31 July 2023
Maturity at 31 July 2022
\nUp to
\none year
One to five years
\nMore than
\nfive years
\nUp to
\none year
One to five years
\nMore than
\nfive years
\nFair value hedges
\nInterest rate risk
Interest rate swaps \u2013 EUR
\u2013 Notional amount (\u00a3m)
\u2013
\u2013
\u2013
336
\u2013
\u2013
\n\u2013 Average spread over three-month EURIBOR
\u2013
\u2013
\u2013
1.015%
\u2013
\u2013
\nInterest rate/
\nforeign currency risk
\nCross-currency swaps (EUR:GBP)
\u2013 Notional amount (\u00a3m)
\u2013
254
\u2013
\u2013
254
\u2013
\n\u2013 Average exchange rate
\u2013
0.845
\u2013
\u2013
0.845
\u2013
\n\u2013 Average spread over three-month GBP
\nSONIA
\n\u2013
1.860%
\u2013
\u2013
1.860%
\u2013
\nNet investment hedges
\nForeign currency risk
Cross-currency swaps (EUR:USD)
\u2013 Notional amount (\u00a3m)
\u2013
\u2013
\u2013
354
\u2013
\u2013
\n\u2013 Average exchange rate
\u2013
\u2013
\u2013
1.0773
\u2013
\u2013
\nCross-currency swaps (GBP:USD)
\u2013 Notional amount (\u00a3m)
\u2013
247
\u2013
\u2013
261
\u2013
\n\u2013 Average exchange rate
\u2013
1..2534
\u2013
\u2013
1.2534
\u2013
\nCash-flow hedges
\nForeign currency risk
Foreign exchange contracts (EUR:GBP)
\u2013 Notional amount (\u00a3m)
41
8
\u2013
28
8
\u2013
\n\u2013 Average exchange rate
0.7842
0.8893
\u2013
0.8323
1.1676
\u2013
\nForeign exchange contracts (EUR:USD)
\u2013 Notional amount (\u00a3m)
30
\u2013
\u2013
77
\u2013
\u2013
\n\u2013 Average exchange rate
1.0939
\u2013
\u2013
4.1785
\u2013
\u2013
\nForeign exchange contracts (USD:GBP)
\u2013 Notional amount (\u00a3m)
18
\u2013
\u2013
16
\u2013
\u2013
\n\u2013 Average exchange rate
1.2269
\u2013
\u2013
1.3273
\u2013
\u2013
\nForeign exchange contracts (GBP:CZK)
\u2013 Notional amount (\u00a3m)
10
\u2013
\u2013
6
\u2013
\u2013
\n\u2013 Average exchange rate
27.7919
\u2013
\u2013
30.2988
\u2013
\u2013
\nForeign exchange contracts (EUR:AUD)
\u2013 Notional amount (\u00a3m)
7
\u2013
\u2013
6
\u2013
\u2013
\n\u2013 Average exchange rate
1.6603
\u2013
\u2013
1.5226
\u2013
\u2013
\nAt 31 July 2023, the Group had forward foreign exchange contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) designated as cash-flow hedges. These forward foreign exchange contracts are in relation
\nto sale and purchase of multiple currencies with varying maturities up to 19 September 2024. The largest single currency pairs are disclosed above and make up 100% of the notional hedged exposure. The
\nnotional and fair values of these foreign exchange forward derivatives are shown in the nominal amount and fair value of derivative contracts table on page 176.
\n
\n
\n
21. FAIR VALUE OF FINANCIAL INSTRUMENTS
\nAs at 31 July 2023
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
347
351
351
\nOther investments
14
F
\u2013
13
7
20
20
\nCash and cash
\nequivalents
18
B
285
\u2013
\u2013
285
285
\nTrade and other
\nfinancial receivables
16
B/C
726
\u2013
\u2013
726
726
\nDerivative financial
\ninstruments
20
C
\u2013
5
\u2013
5
5
\nTotal financial
\nassets
1,011
22
354
1,387
1,387
\nFinancial liabilities
\nTrade and other
\nfinancial payables
B
(476)
\u2013
\u2013
(476)
(476)
\nShort-term
\nborrowings
18
B/D
(3)
\u2013
\u2013
(3)
(3)
\nLong-term
\nborrowings
18
E
(534)
\u2013
\u2013
(534)
(520)
\nLease liabilities
18
E
(117)
\u2013
\u2013
(117)
(117)
\nDerivative financial
\ninstruments
20
C
\u2013
(20)
\u2013
(20)
(20)
\nTotal financial
\nliabilities
(1,130)
(20)
\u2013
(1,150)
(1,136)
\nThe fair value of a financial instrument is the price at which an asset could be exchanged, or a
\nliability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. Fair
\nvalues have been determined with reference to available market information at the balance sheet
\ndate, using the methodologies described below:
\nA
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 1 as defined by IFRS 13).
\nB
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 2 as defined by IFRS 13).
\nC
Fair values of derivative financial assets and liabilities, and trade receivables held to collect or
\nsell are estimated by discounting expected future contractual cash-flows using prevailing
\ninterest rate curves. Amounts denominated in foreign currencies are valued at the exchange
\nrate prevailing at the balance sheet date. These financial instruments are included on the
\nbalance sheet at fair value, derived from observable market prices (Level 2 as defined by
\nIFRS\u00a013).
\nAs at 31 July 2022
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
364
368
368
\nOther investments
14
F
\u2013
19
8
27
27
\nCash and cash
\nequivalents
18
A
506
550
\u2013
1,056
1,056
\nTrade and other
\nfinancial receivables
16
B/C
807
\u2013
\u2013
807
807
\nDerivative financial
\ninstruments
20
C
\u2013
4
\u2013
4
4
\nTotal financial
\nassets
1,313
577
372
2,262
2,262
\nFinancial liabilities
\nTrade and other
\nfinancial payables
17
B
(728)
\u2013
\u2013
(728)
(728)
\nShort-term
\nborrowings
18
D
(509)
\u2013
\u2013
(509)
(509)
\nLong-term
\nborrowings
18
D
(538)
\u2013
\u2013
(538)
(544)
\nLease liabilities
18
E
(119)
\u2013
\u2013
(119)
(119)
\nDerivative financial
\ninstruments
20
C
\u2013
(47)
\u2013
(47)
(47)
\nTotal financial
\nliabilities
(1,894)
(47)
\u2013
(1,941)
(1,947)
\nD
Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are
\nvalued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is
\nestimated using quoted prices (Level 1 as defined by IFRS 13).
\nE
Leases are carried at amortised cost. Amounts denominated in foreign currencies are valued
\nat the exchange rate prevailing at the balance sheet date. The fair value of the lease contract is
\nestimated by discounting contractual future cash-flows (Level 2 as defined by IFRS 13).
\nF
The fair value of instruments is estimated by using unobservable inputs to the extent that
\nrelevant observable inputs are not available. Unobservable inputs are developed using the
\nbest information available in the circumstances, which may include the Group\u2019s own data,
\ntaking into account all information about market participation assumptions that is reliably
\navailable (Level 3 as defined by IFRS 13).
\nIFRS 13 defines a three-level valuation hierarchy:
\nLevel 1 \u2013 quoted prices for similar instruments
\nLevel 2 \u2013 directly observable market inputs other than Level 1 inputs
\nLevel 3 \u2013 inputs not based on observable market data
\n
\n
\n
22. COMMITMENTS
\nAt 31 July 2023, commitments, comprising bonds and guarantees arising in the normal course of
\nbusiness, amounted to \u00a3207m (FY2022: \u00a3234m), including pension commitments of \u00a356m
\n(FY2022: \u00a356m) and charitable funding commitments for the Smiths Group Foundation of \u00a310m
\n(FY2022: Nil). In addition, the Group has committed expenditure on capital projects\u00a0amounting to
\n\u00a313m (FY2022: \u00a315m).
\n23. PROVISIONS AND CONTINGENT LIABILITIES
\nTrading
Non-headline and legacy
Total
\n\u00a3m
\nJohn Crane,
\nInc.
\nlitigation
\n\u00a3m
\nTiteflex
\nCorporation
\nlitigation
\n\u00a3m
\nOther
\n\u00a3m
\u00a3m
\nAt 31 July 2021
11
212
47
17
287
\nForeign exchange rate movements
1
30
6
2
39
\nProvision charged
6
6
2
26
40
\nProvision released
(3)
\u2013
\u2013
\u2013
(3)
\nUnwind of provision discount
\u2013
2
1
\u2013
3
\nUtilisation
(4)
(21)
(4)
(2)
(31)
\nAt 31 July 2022
11
229
52
43
335
\nComprising:
\nCurrent liabilities
10
34
14
30
88
\nNon-current liabilities
1
195
38
13
247
\nAt 31 July 2022
11
229
52
43
335
\nForeign exchange rate movements
\u2013
(12)
(3)
\u2013
(15)
\nProvision charged
5
13
\u2013
18
36
\nProvision released
(4)
\u2013
(7)
(14)
(25)
\nUnwind of provision discount
\u2013
6
1
\u2013
7
\nUtilisation
(4)
(32)
(2)
(14)
(52)
\nAt 31 July 2023
8
204
41
33
286
\nComprising:
\nCurrent liabilities
6
27
13
24
70
\nNon-current liabilities
2
177
28
9
216
\nAt 31 July 2023
8
204
41
33
286
\nThe John Crane, Inc. and Titeflex Corporation litigation provisions were the only provisions that
\nwere discounted; other provisions have not been discounted as the impact would be immaterial.
\nTRADING
\nThe provisions included as trading represent amounts provided for in the ordinary course of
\nbusiness. Trading provisions are charged and released through headline profit.
\nWarranty provision and product liability
\nAt 31 July 2023, the Group had warranty and product liability provisions of \u00a36m (FY2022: \u00a37m).
\nWarranties over the Group\u2019s products typically cover periods of between one and three years.
\nProvision is made for the likely cost of after-sales support based on the recent past experience of
\nindividual businesses.
\nCommercial disputes and litigation in respect of ongoing business activities
\nThe Group has on occasion been required to take legal action to protect its intellectual property and
\nother rights against infringement. It has also had to defend itself against proceedings brought by
\nother parties, including product liability and insurance subrogation claims. Provision is made for any
\nexpected costs and liabilities in relation to these proceedings where appropriate, although there can
\nbe no guarantee that such provisions (which may be subject to potentially material revision from
\ntime to time) will accurately predict the actual costs and liabilities that may be incurred.
\nContingent liabilities
\nIn the ordinary course of its business, the Group is subject to commercial disputes and litigation
\nsuch as government price audits, product liability claims, employee disputes and other kinds of
\nlawsuits, and faces different types of legal issues in different jurisdictions. The high level of
\nactivity in the US, for example, exposes the Group to the likelihood of various types of litigation
\ncommonplace in that country, such as \u2018mass tort\u2019 and \u2018class action\u2019 litigation, legal challenges to
\nthe scope and validity of patents, and product liability and insurance subrogation claims. These
\ntypes of proceedings (or the threat of them) are also used to create pressure to encourage
\nnegotiated settlement of disputes. Any claim brought against the Group (with or without merit)
\ncould be costly to defend. These matters are inherently difficult to quantify. In appropriate cases a
\nprovision is recognised based on best estimates and management judgement but there can be no
\nguarantee that these provisions (which may be subject to potentially material revision from time
\nto time) will result in an accurate prediction of the actual costs and liabilities that may be incurred.
\nThere are also contingent liabilities in respect of litigation for which no provisions are made.
\nThe Group operates in some markets where the risk of unethical or corrupt behaviour is material
\nand has procedures, including an employee ethics alert line, to help it identify potential issues.
\nSuch procedures will, from time to time, give rise to internal investigations, sometimes conducted
\nwith external support, to ensure that the Group properly understands risks and concerns and
\ncan\u00a0take steps both to manage immediate issues and to improve its practices and procedures
\nfor\u00a0the future. The Group is not aware of any issues which are expected to generate material
\nfinancial exposures.
\n
\n
\n
NON-HEADLINE AND LEGACY
\nJohn Crane, Inc.
\nJohn Crane, Inc. (JCI) is one of many co-defendants in numerous lawsuits pending in the United
\nStates in which plaintiffs are claiming damages arising from alleged exposure to, or use of,
\nproducts previously manufactured which contained asbestos. Until 2006, the awards, the related
\ninterest and all material defence costs were met directly by insurers. In 2007, JCI secured the
\ncommutation of certain insurance policies in respect of product liability. Provision is made in
\nrespect of the expected costs of defending known and predicted future claims and of adverse
\njudgements in relation thereto, to the extent that such costs can be reliably estimated.
\nThe JCI products generally referred to in these cases consist of industrial sealing products,
\nprimarily packing and gaskets. The asbestos was encapsulated within these products in such a
\nmanner that causes JCI to understand, based on tests conducted on its behalf, that the products
\nwere safe. JCI ceased manufacturing products containing asbestos in 1985.
\nJCI continues to actively monitor the conduct and effect of its current and expected asbestos
\nlitigation, including the most efficacious presentation of its \u2018safe product\u2019 defence, and intends to
\ncontinue to resist these asbestos claims based upon this defence. The table below summarises
\nthe JCI claims experience over the last 40 years since the start of this litigation:
\nYear ended
\n31 July 2023
\nYear ended
\n31 July 2022
\nYear ended
\n31 July 2021
\nYear ended
\n31 July 2020
\nYear ended
\n31 July 2019
\nJCI claims experience
\nClaims against JCI that have been dismissed
310,000
306,000
305,000
297,000
285,000
\nClaims JCI is currently a defendant in
20,000
22,000
22,000
25,000
38,000
\nCumulative final judgements, after appeals,
\nagainst JCI since 1979
154
149
149
149
144
\nCumulative value of awards (US$m) since
\n1979
190
175
175
175
168
\nThe number of claims outstanding at 31 July 2023 reflected the benefit of 4,000 (FY2022: 1,000)
\nclaims being dismissed in the year.
\nJCI has also incurred significant additional defence costs. The litigation involves claims for a
\nnumber of allegedly asbestos-related diseases, with awards, when made, for mesothelioma
\ntending to be larger than those for the other diseases. JCI\u2019s ability to defend mesothelioma cases
\nsuccessfully is, therefore, likely to have a significant impact on its annual aggregate adverse
\njudgement and defence\u00a0costs.
\nJohn Crane, Inc. litigation provision
\nThe provision is based on past history of JCI claims and well-established tables of asbestos-
\nrelated disease incidence projections. The provision is determined using advice from asbestos
\nvaluation experts, Bates White LLC. The assumptions made in assessing the appropriate level of
\nprovision include: the period over which the expenditure can be reliably estimated; the future
\ntrend of legal costs; the rate of future claims filed; the rate of successful resolution of claims; and
\nthe average amount of judgements awarded. The provision utilised in the period is higher than
\nprevious periods, principally due to the resolution of outstanding verdicts from previous periods.
\nTrial delays arising from the COVID-19 pandemic have largely abated and trial activity has
\nreturned to pre-pandemic levels.
\nEstablished incidence curves can be used to estimate the likely future pattern of asbestos-related
\ndisease. However, JCI\u2019s claims experience is also significantly impacted by other factors which
\ninfluence the US litigation environment. These can include: changing approaches on the part of
\nthe plaintiffs\u2019 bar; changing attitudes amongst the judiciary at both trial and appellate levels in
\nspecific jurisdictions which move the balance of risk and opportunity for claimants; and legislative
\nand procedural changes in both the state and federal court systems.
\nThe projections use a limited time horizon on the basis that Bates White LLC consider that there
\nis substantial uncertainty in the asbestos litigation environment. So probable expenditures are
\nnot\u00a0reasonably estimable beyond this time horizon. Asbestos is the longest running mass tort
\nlitigation in American history and is constantly evolving in ways that cannot be anticipated. JCI\u2019s
\ndefence strategy also generates a significantly different pattern of legal costs and settlement
\nexpenses from other defendants. Thus JCI is in an extremely rare position, and evidence from
\nother litigation cannot be used to improve the reliability of the projections. A ten-year (FY2022:
\nten-year) time horizon has been used based on past experience regarding significant changes in
\nthe litigation environment that have occurred every few years and on the amount of time taken in
\nthe past for some of those changes to impact the broader asbestos litigation environment.
\nThe rate of future claims filed has been estimated using well-established tables of asbestos
\nincidence projections to determine the likely population of potential claimants, and JCI\u2019s past
\nexperience to determine what proportion of this population will make a claim against JCI. The JCI
\nproducts generally referred to in claims had industrial and marine applications. As a result, the
\nincidence curve used for JCI\u00a0projections excludes construction workers, and is a composite of the
\ncurves that predict asbestos exposure-related disease from shipyards and other occupations.
\nThis is consistent with JCI\u2019s litigation history.
\nThe rate of successful resolution of claims and the average amount of any judgements awarded
\nare projected based on the past history of JCI claims, since this is the best available evidence,
\ngiven JCI\u2019s unusual strategy of defending all claims.
\nThe future trend of legal costs is estimated based on JCI\u2019s past experience, adjusted to reflect the
\nassumed levels of claims and trial activity, since the number of trials is a key driver of legal costs.
\nJohn Crane, Inc. litigation insurance recoveries
\nWhile JCI has certain excess liability insurance, JCI has met defence costs directly. The
\ncalculation of the provision does not take account of any potential recoveries from insurers.
\nJohn Crane, Inc. litigation provision sensitivities
\nThe provision may be subject to potentially material revision from time to time if new information
\nbecomes available as a result of future events. There can be no guarantee that the assumptions
\nused to estimate the provision will result in an accurate prediction of the actual costs that will be
\nincurred because of the significant uncertainty associated with the future level of asbestos claims
\nand of the costs arising out of related litigation, including the unpredictability of jury verdicts.
\n
\n
\n
John Crane, Inc. statistical reliability of projections over the ten-year time horizon
\nIn order to evaluate the statistical reliability of the projections, a population of outcomes is
\nmodelled using randomised verdict outcomes. This generated a distribution of outcomes with
\nfuture spend at the 5th percentile of \u00a3180m and future spend at the 95th percentile of \u00a3245m
\n(FY2022: \u00a3203m and \u00a3268m, respectively). Statistical analysis of the distribution of these
\noutcomes indicates that there is a 50% probability that the total future spend will fall between
\n\u00a3228m and \u00a3257m (FY2022: between \u00a3239m and \u00a3263m), compared to the gross provision value
\nof \u00a3246m (FY2022: \u00a3258m).
\nJohn Crane, Inc. litigation provision history
\nThe JCI asbestos litigation provision of \u00a3204m (FY2022: \u00a3229m) is a discounted pre-tax provision
\nusing discount rates, being the risk-free rate on US debt instruments for the appropriate period.
\nThe deferred tax asset related to this provision is shown within the deferred tax balance (note 6).
\nThe JCI asbestos litigation provision has developed over the last five years as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nYear ended
\n31 July 2021
\n\u00a3m
\nYear ended
\n31 July 2020
\n\u00a3m
\nYear ended
\n31 July 2019
\n\u00a3m
\nJohn Crane, Inc. litigation provision
\nGross provision
246
258
220
235
257
\nDiscount
(42)
(29)
(8)
(4)
(20)
\nDiscounted pre-tax provision
204
229
212
231
237
\nDeferred tax
(51)
(57)
(54)
(59)
(50)
\nDiscounted post-tax provision
153
172
158
172
187
\nOperating profit charge/(credit)
\nIncreased provisions for adverse judgements
\nand legal defence costs
28
24
10
14
7
\nChange in US risk-free rates
(15)
(18)
(5)
16
8
\nSubtotal \u2013 items charged to the provision
13
6
5
30
15
\nLitigation management, legal fees in
\nconnection with litigation against insurers and
\ndefence strategy
2
1
1
1
2
\nRecoveries from insurers
(7)
\u2013
(9)
(3)
(11)
\nTotal operating profit charge/(credit)
8
7
(3)
28
6
\nCash-flow
\nProvision utilisation \u2013 legal defence costs and
\nadverse judgements
(32)
(21)
(13)
(23)
(24)
\nLitigation management expense
(2)
(1)
\u2013
(1)
(2)
\nRecoveries from insurers
7
\u2013
9
3
11
\nNet cash outflow
(27)
(22)
(4)
(21)
(15)
\nJohn Crane, Inc. sensitivity of the projections to changes in the time horizon used
\nIf the asbestos litigation environment becomes more volatile and uncertain, the time horizon over
\nwhich the provision can be calculated may reduce. Conversely, if the environment became more
\nstable, or JCI changed approach and committed to long-term settlement arrangements, the time
\nperiod covered by the provision might be extended.
\nThe projections use a ten-year time horizon. Reducing the time horizon by one year would reduce
\nthe provision by \u00a316m (FY2022: \u00a318m) and reducing it by five years would reduce the provision by
\n\u00a387m (FY2022: \u00a397m).
\nWe consider, after obtaining advice from Bates White LLC, that to forecast beyond ten years
\nrequires that the litigation environment remains largely unchanged with respect to the historical
\nexperience used for estimating future asbestos expenditures. Historically, the asbestos litigation
\nenvironment has undergone significant changes more often than every ten years. If one assumed
\nthat the asbestos litigation environment would remain unchanged for longer and extended the
\ntime horizon by one year, it would increase the pre-tax provision by \u00a313m (FY2022: \u00a315m) and
\nextending it by five years would increase the pre-tax provision by \u00a348m (FY2022: \u00a356m).
\nHowever,\u00a0there are also reasonable scenarios that, given certain recent events in the US asbestos
\nlitigation environment, would result in no additional asbestos litigation for JCI beyond ten years.
\nAt this time, how the asbestos litigation environment will evolve beyond ten years is not
\nreasonably estimable.
\nJohn Crane, Inc. contingent liabilities
\nProvision has been made for future defence costs and the cost of adverse judgements expected to
\noccur. JCI\u2019s claims experience is significantly impacted by other factors which influence the US
\nlitigation environment. These can include: changing approaches on the part of the plaintiffs\u2019 bar;
\nchanging attitudes amongst the judiciary at both trial and appellate levels; and legislative and
\nprocedural changes in both the state and federal court systems. As a result, whilst the Group
\nanticipates that asbestos litigation will continue beyond the period covered by the provision, the
\nuncertainty surrounding the US litigation environment beyond this point is such that the costs cannot
\nbe reliably\u00a0estimated.
\nAlthough the methodology used to calculate the JCI litigation provision can in theory be applied to
\nshow claims and costs for longer periods, the Directors consider, based on advice from Bates
\nWhite LLC, that the level of uncertainty regarding the factors used in estimating future costs is
\ntoo great to provide for reasonable estimation of the numbers of future claims, the nature of such
\nclaims or the cost to resolve them for years beyond the ten-year time horizon.
\nTiteflex Corporation
\nTiteflex Corporation, a subsidiary of the Group in the Flex-Tek division, has received a number of
\nclaims in the US from insurance companies seeking recompense on a subrogated basis for the
\neffects of damage allegedly caused by lightning strikes in relation to its flexible gas piping
\nproduct. It has also received product liability claims regarding this product in the US, some in the
\nform of purported class actions. Titeflex Corporation believes that its products are a safe and
\neffective means of delivering gas when installed in accordance with the manufacturer\u2019s
\ninstructions and local and national codes. However, some claims have been settled on an
\nindividual basis without admission of liability. Equivalent third-party products in the US
\nmarketplace face similar challenges.
\n
\n
\n
Titeflex Corporation litigation provision
\nThe continuing progress of claims and the pattern of settlement, together with recent
\nmarketplace activity, provide sufficient evidence to recognise a liability in the accounts. Therefore
\nprovision has been made for the costs which the Group is expected to incur in respect of future
\nclaims to the extent that such costs can be reliably estimated. Titeflex Corporation sells flexible
\ngas piping with extensive installation and safety guidance designed to assure the safety of the
\nproduct and minimise the risk of damage associated with lightning strikes.
\nThe assumptions made in assessing the appropriate level of provision, which are based on past
\nexperience, include: the period over which expenditure can be reliably estimated; the number of
\nfuture settlements; the average amount of settlements; and the impact of statutes of repose and safe
\ninstallation initiatives on the expected number of future claims. The assumptions relating to the
\nnumber of future settlements exclude the use of recent claims history due to the uncertain impact
\nthat the COVID-19 lockdown has had on the number of claims.
\nThe provision of \u00a341m (FY2022: \u00a352m) is a discounted pre-tax provision using discount rates,
\nbeing the risk-free rate on US debt instruments for the appropriate period. The deferred tax asset
\nrelated to this provision is shown within the deferred tax balance (note 6).
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nGross provision
78
87
\nDiscount
(37)
(35)
\nDiscounted pre-tax provision
41
52
\nDeferred tax
(9)
(12)
\nDiscounted post-tax provision
32
40
\nTiteflex Corporation litigation provision history
\nA credit of \u00a38m (FY2022: \u00a32m charge) has been recognised by Titeflex Corporation in respect of
\nchanges to the estimated cost of future claims from insurance companies seeking recompense
\nfor damage allegedly caused by lightning strikes. The lower gross provision value has been
\nprincipally driven by an increase in the discount factor deriving from increasing US dollar
\ndiscount\u00a0rates.
\nTiteflex Corporation litigation provision sensitivities
\nThe significant uncertainty associated with the future level of claims and of the costs arising out of
\nrelated litigation means that there can be no guarantee that the assumptions used to estimate the
\nprovision will result in an accurate prediction of the actual costs that will be incurred. Therefore
\nthe provision may be subject to potentially material revision from time to time, if new information
\nbecomes available as a result of future events.
\nThe projections incorporate a long-term assumption regarding the impact of safe installation
\ninitiatives on the level of future claims. If the assumed annual benefit of bonding and grounding
\ninitiatives were 0.5% higher, the provision would be \u00a32m (FY2022: \u00a33m) lower, and if the benefit
\nwere 0.5% lower, the provision would be \u00a32m (FY2022: \u00a34m) higher.
\nThe projections use assumptions of future claims that are based on both the number of future
\nsettlements and the average amount of those settlements. If the assumed average number of
\nfuture settlements increased 10%, the provision would rise by \u00a33m (FY2022: \u00a35m), with an
\nequivalent fall for a reduction of 10%. If the assumed amount of those settlements increased 10%,
\nthe provision would rise by \u00a32m (FY2022: \u00a34m), also with an equivalent fall for a reduction of 10%.
\nOther non-headline and legacy provisions
\nNon-headline provisions comprise all provisions that were disclosed as non-headline items when
\nthey were charged to the consolidated income statement. Legacy provisions comprise non-material
\nprovisions relating to former business activities and discontinued operations and properties no
\nlonger used by Smiths.
\nThese non-material provisions include non-headline reorganisation, disposal indemnities,
\nlitigation and arbitration in respect of old products and discontinued business activities, which
\nincludes claims received in connection with the disposal of Smiths Medical in the prior year.
\nProvision is made for the best estimate of the expected expenditure related to the defence and/or
\nresolution of such matters. There is an inherent risk in legal proceedings that the outcome may
\nbe unfavourable to the Group, and as such there can be no guarantee that such provisions (which
\nmay be subject to potentially material revision from time to time) will be sufficient.
\nReorganisation
\nAt 31 July 2023, there were reorganisation provisions of \u00a37m (FY2022: \u00a31m) relating to the various
\nrestructuring programmes that are expected to be utilised in the next 18 months.
\nProperty
\nAt 31 July 2023, there were provisions of \u00a310m (FY2022: \u00a310m) related to actual and potential
\nenvironmental issues for sites currently or previously occupied by Smiths operations.
\n
\n
\n
24. SHARE CAPITAL
\nNumber of shares
\nAverage number
\nof shares
\nIssued
\ncapital
\n\u00a3m
\nConsideration
\n\u00a3m
\nOrdinary shares of 37.5p each
\nTotal share capital at 31 July 2021
396,377,114
396,350,586
149
\nIssue of new equity shares \u2013 exercise of
\nshare options
131,942
125,354
\u2013
2
\nShare buybacks
(34,152,897)
(9,797,729)
(13)
(511)
\nTotal share capital at 31 July 2022
362,356,159
386,678,211
136
\nShare buybacks
(13,053,169)
(32,555,024)
(5)
(207)
\nShares held in Employee Benefit Trust
\u2013
(1,232,067)
\nTotal share capital at 31 July 2023
349,302,990
352,891,120
131
\nSHARE CAPITAL STRUCTURE
\nAs at 31 July 2023, the Company\u2019s issued share capital was 349,302,990 ordinary shares with a
\nnominal value of 37.5p per share. All of the issued share capital was in free issue and all issued
\nshares are fully paid.
\nThe Company\u2019s ordinary shares are listed and admitted to trading on the Main Market of the
\nLondon Stock Exchange. The Company has an American Depositary Receipt (ADR) programme
\nand one ADR equates to one ordinary share. As at 31 July 2023, 3,335,964 ordinary shares were
\nheld by the nominee of the programme in respect of the same number of ADRs in issue.
\nThe holders of ordinary shares are entitled to receive the Company\u2019s Reports and Accounts, to
\nattend and speak at General Meetings of the\u00a0Company, to appoint proxies and to exercise voting
\nrights. None of the ordinary shares carry any special rights with regard to control of\u00a0the Company
\nor distributions made by the Company.
\nThere are no known agreements relating to, or restrictions on, voting rights attached to the
\nordinary shares (other than the 48-hour cut-off for casting proxy votes prior to a General
\nMeeting). There are no restrictions on the transfer of shares, and there is no requirement to
\nobtain approval for a share transfer. There are no known arrangements under which financial
\nrights are held by a person other than the holder of the ordinary shares. There are no known
\nlimitations on the holding of shares.
\nPOWERS OF DIRECTORS
\nThe Directors are authorised to issue and allot shares and to buy back shares subject to receiving
\nshareholder approval at the General Meeting. Such authorities were granted by shareholders at
\nthe 2022 Annual General Meeting. At the 2023 AGM, it will be proposed that the Directors be
\ngranted new authorities to allot and buy back shares.
\nSHARE BUYBACKS
\nAs at 15 September 2023 (the latest practicable date for inclusion in this report), the Company had
\nan unexpired authority to repurchase ordinary shares up to a maximum of 10.7 million ordinary
\nshares (FY2022: 59 million). As at 15 September 2023, the Company did not hold any shares in
\ntreasury. Any ordinary shares purchased may be cancelled or held in treasury.
\nIn connection with the sale of Smiths Medical to ICU Medical, Inc., and in the light of our strong
\nbalance sheet and cash-flows, the Group announced that it intended to return an amount
\nrepresenting 55% of the initial cash proceeds (equating to an aggregate purchase price of up to
\nUS$1bn or \u00a3742m) to shareholders in the form of a Share Buyback Programme. All shares
\npurchased under the Programme will be cancelled. This Programme was initiated on 19
\nNovember 2021 as announced to the London Stock Exchange on 11 November 2021 and following
\nshareholder approval at the General Meeting held on 17 November 2021.
\nA total number of 13,008,032 ordinary shares of 37.5p each were repurchased during the period,
\nfor a total consideration of \u00a3206,142,265, of which 84,195 shares with a value of \u00a31,430,464 were
\nyet to settle and be cancelled. In total since the start of the Programme, 47,290,261 shares have
\nbeen repurchased, for a total consideration of \u00a3718,939,264, representing 11.93% of the called-up
\nordinary share capital outstanding at the start of the Programme.
\nA further 1,379,697 ordinary shares have been repurchased during the period of 1 August
\n2023\u00a0to\u00a015 September 2023, bringing the total number of shares repurchased to 48,669,958.
\nAt\u00a015\u00a0September 2023, the Group had paid \u00a3737m of the expected \u00a3742m payable under the
\nProgramme, with the remaining \u00a35m expected to be utilised within the next two weeks.
\nEMPLOYMENT SHARE SCHEMES
\nShares acquired through Company share schemes and plans rank pari passu with the shares in
\nissue and have no special rights. The Company operates an Employee Benefit Trust, with an
\nindependent trustee, to hold shares pending employees becoming entitled to them under the
\nCompany\u2019s share schemes and plans. On 31 July 2023, the Trust held 1,742,929 (FY2022: 618,662)
\nordinary shares in the Company. The Trust waived its dividend entitlement on its holding during
\nthe year, and the Trust abstains from voting any shares held at General Meetings.
\n
\n
\n
25. DIVIDENDS
\nThe following dividends were declared and paid in the period:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nOrdinary final dividend of 27.3p (FY2022: 26.0p) paid 19 November 2022
97
103
\nOrdinary interim dividend of 12.9p (FY2022: 12.3p) paid 17 May 2023
46
47
\n143
150
\nIn the current year a total dividend of 40.2p has been paid, comprising a final dividend of 27.3p paid
\nin respect of FY2022 and an interim dividend of 12.9p paid in respect of FY2023. In the prior year a
\ntotal dividend of 38.3p was paid, comprising a final dividend of 26.0p paid in respect of FY2021 and
\nan interim dividend of 12.3p paid in respect of FY2022.
\nThe final dividend for the year ended 31 July 2023 of 28.7p per share was recommended by the
\nBoard on 21 September 2023 and will be paid to shareholders on 24 November 2023, subject to
\napproval by the shareholders. This dividend is payable to all shareholders on the register of
\nmembers at 6.00pm on 20 October 2023 (the record date).
\nWAIVER OF DIVIDENDS
\nThe following waived all dividends payable in the year, and all future dividends, on their
\nshareholdings in the Company:
\n\u2013
Winterflood Client Nominees Limited (Buck Trustees Dividend Waived Ltd)
\n26. RESERVES
\nRetained earnings include the value of Smiths Group plc shares held by the Smiths Industries
\nEmployee Benefit Trust. In the year the Company issued nil (FY2022: nil) shares to the Trust, the
\nTrust purchased 1,553,558 shares (FY2022: 1,069,998 shares) in the market for a consideration
\nof \u00a325m (FY2022: \u00a316m) and redeemed 429,291 shares (FY2022: 777,700) to employees for a
\ncumulative option cost of \u00a31m (FY2022: \u00a3nil). At 31\u00a0July\u00a02023, the Trust held 1,742,929 (FY2022:
\n618,662) ordinary shares.
\nOther reserves comprise the capital redemption reserve, revaluation reserve and merger
\nreserve, which arose from share repurchases, revaluations of property, plant and equipment, and
\nmerger accounting for business combinations before the adoption of IFRS, respectively.
\nCAPITAL MANAGEMENT
\nCapital employed comprises total equity adjusted for goodwill recognised directly in reserves, net
\nretirement benefit-related assets\u00a0and liabilities, net litigation provisions relating to non-headline
\nitems and net debt. The efficiency of the allocation of capital to the divisions is monitored through
\nthe return on capital employed (ROCE). This ratio is calculated over a rolling 12-month period and
\nis the percentage that headline operating profit comprises of monthly average capital employed.
\nIn FY2023 ROCE was 15.7% (FY2022: 14.2%); see note\u00a029.
\nCapital structure is based on the Directors\u2019 judgement of the balance required to maintain
\nflexibility, whilst achieving an efficient cost of\u00a0capital.
\nThe FY2023 ratio of net debt to headline EBITDA of 0.7 (FY2022: 0.3) is within the Group\u2019s stated
\npolicy of 2.0 or less over the medium term. The Group\u2019s robust balance sheet and record of strong
\ncash generation are more than able to fund immediate investment needs and legacy obligations.
\nSee note 29 for the definition of headline EBITDA and the calculation of this ratio.
\nAs part of its capital management, the Group maintains a solid investment grade credit rating to
\nensure access to the widest\u00a0possible sources of financing and to optimise the resulting cost of
\ncapital. At 31 July 2023, the Group had a credit rating of BBB+/Baa2 (FY2022:\u00a0BBB+/Baa2) with
\nStandard & Poor\u2019s and Moody\u2019s respectively.
\nThe Board has a progressive dividend policy for future payouts, with the aim of increasing
\ndividends in line with the long-term underlying growth in earnings. In setting the level of dividend
\npayments, the Board will take into account prevailing economic conditions and future investment
\nplans, along with the objective to maintain a minimum dividend cover of at least two times.
\nHEDGE RESERVE
\nThe hedge reserve on the balance sheet records the cumulative gain or loss on designated
\nhedging instruments, and comprises:
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNet investment hedge reserve (net of \u00a38m of deferred tax (FY2022: \u00a38m))
(188)
(205)
\nCash-flow hedge reserve
\u2013
3
\n(188)
(202)
\nSee transactional currency exposure risk management disclosures in note 19 for additional
\ndetails of cash-flow hedges, and translational currency exposure risk management disclosure
\nalso in note 19 for additional details of net investment hedges.
\nNON-CONTROLLING INTEREST
\nThe Group has recorded non-controlling interests of \u00a322m (FY2022: \u00a322m), of which the most
\nsignificant balance is in John Crane Japan Inc., which represented \u00a319m (FY2022: \u00a320m) of the
\ntotal non-controlling interests.
\nThe non-controlling interest in John Crane Japan Inc. represents a 30% interest. John Crane
\nJapan Inc. generated operating profits of \u00a35m in the period (FY2022: \u00a35m), and cash inflows from
\noperating activities of \u00a32m (FY2022: \u00a35m). It paid dividends of \u00a31m (FY2022: \u00a31m) and tax of \u00a32m
\n(FY2022: \u00a31m). At 31 July 2023, the company contributed \u00a353m (FY2022: \u00a357m) of net assets to
\nthe Group.
\n
\n
\n
27. ACQUISITIONS
\nOn 5 January 2023, the Group\u2019s Interconnect division acquired 100% of the share capital of
\nPlastronics Sockets & Connectors (Plastronics) for consideration of \u00a325m. The acquisition was
\nfinanced using the Group\u2019s own cash resources. Plastronics is a leading supplier of burn-in test
\nsockets and patented spring probe contacts for the semiconductor test market segment. This
\nacquisition strengthens the existing portfolio of Smiths Interconnect and provides cross-selling
\nopportunities in Asia and the US.
\nThe intangible assets recognised on acquisition comprise customer relationships, intellectual
\nproperty and technology. Goodwill represents the expected synergies from the strategic fit of the
\nacquisition and the value of the expertise in the assembled workforce. From the date of acquisition
\nto 31 July 2023, Plastronics contributed \u00a38m to revenue and less than \u00a31m to profit before taxation
\nand amortisation. If the Group had acquired this business from the beginning of the financial year,
\nthe acquisition would have contributed \u00a315m to revenue and less than \u00a31m to profit before taxation.
\nProvisional balances at the date of acquisition have been provided in the table below. The amounts
\nremain provisional due to the fair value of the deferred consideration not being finalised.
\nPlastronics
\n\u00a3m
\nNon-current assets
\u2013 acquired intangible assets
13
\n\u2013 plant and machinery
2
\nCurrent assets
\u2013 inventory
3
\n\u2013 trade and other receivables
3
\nCurrent liabilities
\u2013 trade and other payables
(3)
\nNet assets acquired
18
\nGoodwill on current period acquisitions
7
\nCash paid during the period
22
\nDeferred consideration
3
\nTotal consideration
25
\nPOST BALANCE SHEET DATE ACQUISITION
\nOn 30 August 2023, the Group acquired the business of Heating & Cooling Products (HCP), for
\nconsideration of approximately \u00a365m, financed using the Group\u2019s own cash resources. HCP is a
\nUS-based manufacturer of Heating, Ventilation & Air Conditioning (HVAC) solutions. This
\nacquisition will further expand the Flex-Tek division\u2019s presence in the North American HVAC
\nmarket, enabling Smiths to serve customers with an even broader product range.
\nThe acquisition has historically contributed \u00a347m of annualised revenue and \u00a36m of annualised
\nprofit before taxation. Due to the short time between the completion of the acquisition and the
\nannouncement date, it has not been possible to complete the determination of the fair values of
\nthe acquired balance sheet.
\n28. CASH-FLOW
\nCASH-FLOW FROM OPERATING ACTIVITIES
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nOperating profit:
\n\u2013 continuing operations
501
(98)
403
417
(300)
117
\n\u2013 discontinued operations
\u2013
6
6
66
(47)
19
\nAmortisation of intangible assets
9
52
61
10
51
61
\nImpairment of intangible assets
\u2013
\u2013
\u2013
\u2013
4
4
\nImpairment of investment within
\ndiscontinued operations
\u2013
\u2013
\u2013
\u2013
14
14
\nDepreciation of property, plant
\nand equipment
42
\u2013
42
38
\u2013
38
\nDepreciation of right of use
\nassets
32
\u2013
32
30
\u2013
30
\n(Gain)/loss on disposal of
\nproperty, plant and equipment
\u2013
\u2013
\u2013
(2)
\u2013
(2)
\n(Gain)/loss on fair value of
\ncontingent consideration
\u2013
6
6
\u2013
\u2013
\u2013
\nShare-based payment expense
13
\u2013
13
13
\u2013
13
\nRetirement benefits*
5
(7)
(2)
5
207
212
\nDecrease/(increase) in
\ninventories
(88)
(1)
(89)
(173)
4
(169)
\nDecrease/(increase) in trade
\nand other receivables
(10)
(53)
(63)
(87)
4
(83)
\nIncrease/(decrease) in trade
\nand other payables
10
39
49
131
(2)
129
\nIncrease/(decrease) in
\nprovisions
(2)
(32)
(34)
(1)
22
21
\nCash generated from operations
512
(88)
424
447
(43)
404
\nInterest paid
(73)
(2)
(75)
(51)
\u2013
(51)
\nInterest received
36
\u2013
36
13
1
14
\nTax paid
(92)
\u2013
(92)
(88)
\u2013
(88)
\nNet cash inflow from operating
\nactivities
383
(90)
293
321
(42)
279
\n\u2013 continuing operations
383
(90)
293
274
(42)
232
\n\u2013 discontinued operations
\u2013
\u2013
\u2013
47
\u2013
47
\n*
The retirement benefits non-headline operating activities principally relate to employer contributions to legacy defined
\nbenefit and post-retirement healthcare plans.
\n
\n
\n
HEADLINE CASH MEASURES \u2013 CONTINUING OPERATIONS
\nThe Group measure of headline operating cash excludes interest and tax, and includes capital
\nexpenditure supporting organic growth. The Group uses operating cash-flow for the calculation
\nof\u00a0cash conversion and free cash-flow for management of capital purposes. See note 29 for
\nadditional details.
\nThe table below reconciles the Group\u2019s net cash-flow from operating activities to headline
\noperating cash-flow and free cash-flow:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nNet cash inflow from operating
\nactivities
383
(90)
293
274
(42)
232
\nInclude:
\nExpenditure on capitalised
\ndevelopment, other intangible
\nassets and property, plant and
\nequipment
(81)
\u2013
(81)
(71)
\u2013
(71)
\nRepayment of lease liabilities
(36)
\u2013
(36)
(34)
\u2013
(34)
\nDisposals of property, plant and
\nequipment
2
\u2013
2
3
\u2013
3
\nFree cash-flow
178
130
\nExclude:
\nRepayment of lease liabilities
36
\u2013
36
34
\u2013
34
\nInterest paid
73
\u2013
73
46
\u2013
46
\nInterest received
(36)
\u2013
(36)
(13)
\u2013
(13)
\nTax paid
92
\u2013
92
79
\u2013
79
\nOperating cash-flow
433
(90)
343
318
(42)
276
\nHEADLINE CASH CONVERSION
\nHeadline operating cash conversion for continuing operations is calculated as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nAs reported
\n\u00a3m
\nRestructuring
\ncosts
\n\u00a3m
\nPro-forma
\nexcluding
\nrestructuring
\ncosts
\n\u00a3m
\nAs reported
\n\u00a3m
\nRestructuring
\ncosts
\n\u00a3m
\nPro-forma
\nexcluding
\nrestructuring
\ncosts
\n\u00a3m
\nHeadline operating profit
501
\u2013
501
417
\u2013
417
\nHeadline operating cash-flow
433
\u2013
433
318
14
332
\nHeadline operating cash
\nconversion
86%
86%
76%
80%
\nRECONCILIATION OF FREE CASH-FLOW TO NET MOVEMENT IN CASH AND CASH
\nEQUIVALENTS:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nFree cash-flow
178
130
\nInvestment in financial assets and acquisition of businesses
(22)
\u2013
\nDisposal of businesses and discontinued operations
(7)
1,331
\nOther net cash-flows used in financing activities (note: repayment of lease
\nliabilities is included in free cash-flow)
(909)
(937)
\nNet decrease in cash and cash equivalents for discontinued operations
\u2013
16
\nNet increase/(decrease) in cash and cash equivalents
(760)
540
\n29. ALTERNATIVE PERFORMANCE MEASURES AND KEY
\nPERFORMANCE INDICATORS
\nThe Group uses several alternative performance measures (APMs) in order to provide additional
\nuseful information on underlying trends and the performance and position of the Group. APMs
\nare non-GAAP and not defined by IFRS; therefore, they may not be directly comparable with other
\ncompanies\u2019 APMs and should not be considered a substitute for IFRS measures.
\nThe Group uses these measures, which are common across the industry, for planning and
\nreporting purposes, to enhance the comparability of information between reporting periods and
\nbusiness units. The measures are also used in discussions with the investment analyst
\ncommunity and by credit rating agencies.
\nWe have identified and defined the following key measures which are used within the business by
\nmanagement to assess the performance of the Group\u2019s businesses:
\nAPM term
Definition and purpose
\nCAPITAL EMPLOYED
Capital employed is a non-statutory measure of invested resources. It
\ncomprises statutory net assets and is adjusted as follows:
\n\u2013 To add goodwill recognised directly in reserves in respect of subsidiaries
\nacquired before 1 August 1998;
\n\u2013 To eliminate the Group's investment in ICU Medical, Inc. equity and
\ndeferred consideration contingent on the future share price performance
\nof ICU Medical, Inc; and
\n\u2013 To eliminate post-retirement benefit assets and liabilities and non-
\nheadline litigation provisions related to John Crane, Inc. and Titeflex
\nCorporation, both net of deferred tax, and net debt.
\nIt is used to monitor capital allocation within the Group. See below for a
\nreconciliation from net assets to capital employed.
\nCAPITAL EXPENDITURE
Comprises additions to property, plant and equipment, capitalised
\ndevelopment and other intangible assets, excluding assets acquired
\nthrough business combinations: see note 1 for an analysis of capital
\nexpenditure. This measure quantifies the level of capital investment into
\nongoing operations.
\n
\n
\n
DIVISIONAL HEADLINE
\nOPERATING PROFIT
\n(DHOP)
\nDHOP comprises divisional earnings before central costs, finance
\ncosts and taxation. DHOP is used to monitor divisional performance. A
\nreconciliation of DHOP to operating profit is shown in note 1.
\nFREE CASH-FLOW
Free cash-flow is calculated by adjusting the net cash inflow from
\noperating activities to include capital expenditure, the repayment of lease
\nliabilities, the proceeds from the disposal of property, plant and equipment
\nand the investment in financial assets relating to operating activities and
\npensions financing outstanding at the balance sheet date. The measure
\nshows cash generated by the Group before discretionary expenditure on
\nacquisitions and returns to shareholders. A reconciliation of free cash-flow
\nis shown in note 28.
\nGROSS DEBT
Gross debt is total borrowings (bank, bonds and lease liabilities). It is used
\nto provide an indication of the Group's overall level of indebtedness. See
\nnote 18 for an analysis of gross debt.
\nHEADLINE
The Group has defined a 'headline' measure of performance that excludes
\nmaterial non-recurring items or items considered non-operational/
\ntrading in nature. Items excluded from headline are referred to as non-
\nheadline items. This measure is used by the Group to measure and monitor
\nperformance excluding material non-recurring items or items considered
\nnon-operational. See note 3 for an analysis of non-headline items.
\nHEADLINE EBITDA
EBITDA is a widely used profit measure, not defined by IFRS, being
\nearnings before interest, taxation, depreciation and amortisation. A
\nreconciliation of headline operating profit to headline EBITDA is shown in
\nthe note below.
\nNET DEBT
Net debt is total borrowings (bank, bonds and lease liabilities) less cash
\nbalances and derivatives used to manage the interest rate risk and currency
\nprofile of the debt. This measure is used to provide an indication of the Group's
\noverall level of indebtedness and is widely used by investors and credit rating
\nagencies. See note 18 for an analysis of net cash/(debt).
\nNON-HEADLINE
The Group has defined a 'headline' measure of performance that excludes
\nmaterial non-recurring items or items considered non-operational/trading
\nin nature. Items excluded from headline are referred to as non-headline
\nitems. This is used by the Group to measure and monitor material non-
\nrecurring items or items considered non-operational. See note 3 for an
\nanalysis of non-headline items.
\nOPERATING CASH-
\nFLOW
\nComprises free cash-flow and excludes cash-flows relating to the
\nrepayment of lease liabilities, interest and taxation. The measure shows
\nhow cash is generated from operations in the Group. A reconciliation of
\noperating cash-flow is shown in note 28.
\nOPERATING PROFIT
Operating profit is earnings before finance costs and tax. A reconciliation of
\noperating profit to profit before tax is shown on the income statement on page
\n130. This common measure is used by the Group to measure and monitor
\nperformance.
\nRETURN ON CAPITAL
\nEMPLOYED (ROCE)
\nSmiths ROCE is calculated over a rolling 12-month period and is the
\npercentage that headline operating profit represents of the monthly
\naverage capital employed on a rolling 12-month basis. This measure of
\nreturn on invested resources is used to monitor performance and capital
\nallocation within the Group. See below for Group ROCE and note 1 for
\ndivisional headline operating profit and divisional capital employed.
\nThe key performance indicators (KPIs) used by management to assess the performance of the
\nGroup\u2019s businesses are as follows:
\nKPI term
Definition and purpose
\nDIVIDEND COVER \u2013
\nHEADLINE
\nDividend cover is the ratio of headline earnings per share (see note 5) to
\ndividend per share (see note 25). This commonly used measure indicates
\nthe number of times the dividend in a financial year is covered by headline
\nearnings.
\nEARNINGS PER SHARE
\n(EPS) GROWTH
\nEPS growth is the growth in headline basic EPS (see note 5), on a reported
\nbasis. EPS growth is used to measure and monitor performance.
\nFREE CASH-FLOW (AS
\nA % OF OPERATING
\nPROFIT)
\nThis measure is defined as free cash-flow divided by headline operating
\nprofit averaged over a three-year performance period. This cash
\ngeneration measure is used by the Group as a performance measure for
\nremuneration purposes.
\nGREENHOUSE GAS
\n(GHG) EMISSIONS
\nREDUCTION
\nGHG reduction is calculated as the percentage change in normalised
\nScope 1 & 2 GHG emissions. Normalised is calculated as tCO
\n2
\ne per \u00a3m of
\nrevenue. This measure is used to monitor environmental performance.
\n
\n
\n
KPI term
Definition and purpose
\nGROSS VITALITY
Gross Vitality is calculated as the percentage of revenue derived from new
\nproducts and services launched in the last five years. This measure is used
\nto monitor the effectiveness of the Group's new product development and
\ncommercialisation.
\nMY SAY ENGAGEMENT
\nSCORE
\nThe overall score in our My Say employee engagement survey. The
\nbiannual survey is undertaken Group-wide. This measure is used by the
\nGroup to monitor employee engagement.
\nOPERATING CASH
\nCONVERSION
\nComprises headline operating cash-flow, excluding restructuring costs,
\nas a percentage of headline operating profit. This measure is used to show
\nthe proportion of headline operating profit converted into cash-flow from
\noperations before investment, finance costs, non-headline items and
\ntaxation. The calculation is shown in note 28.
\nOPERATING PROFIT
\nMARGIN
\nOperating profit margin is calculated by dividing headline operating profit
\nby revenue. This measure is used to monitor the Group\u2019s ability to drive
\nprofitable growth and control costs.
\nORGANIC GROWTH
Organic growth adjusts the movement in headline performance to exclude
\nthe impact of foreign exchange and acquisitions. Organic growth is used by
\nthe Group to aid comparability when monitoring performance.
\nORGANIC
\nREVENUE GROWTH
\n(REMUNERATION)
\nOrganic revenue growth (remuneration) is compounded annualised growth
\nin revenue after excluding the impact of foreign exchange and acquisitions.
\nThe measure used for remuneration differs from organic revenue growth
\nin that it is calculated on a compounded annualised basis. This measure
\nhas historically been used by the Group for aligning remuneration with
\nbusiness performance.
\nPERCENTAGE OF
\nSENIOR LEADERSHIP
\nPOSITIONS TAKEN BY
\nFEMALES
\nPercentage of senior leadership positions taken by females is calculated
\nas the percentage of senior leadership roles (G14+ group) held by females.
\nThis measure is used by the Group to monitor diversity performance.
\nR&D CASH COSTS AS A
\n% OF SALES
\nThis measure is defined as the cash cost of research and development
\nactivities (including capitalised R&D, R&D directly charged to the P&L and
\ncustomer-funded projects) as a percentage of revenue. Innovation is an
\nimportant driver of sustainable growth for the Group and this measures
\nour investment in research and development to drive innovation.
\nRECORDABLE
\nINCIDENT RATE (RIR)
\nRecordable Incident Rate is calculated as the number of recordable
\nincidents \u2013 where an incident requires medical attention beyond first aid
\n\u2013 per 100 colleagues, per year across Smiths. This measure is used by the
\nGroup to monitor health and safety performance.
\nCAPITAL EMPLOYED
\nCapital employed is a non-statutory measure of invested resources. It comprises statutory net
\nassets adjusted to add goodwill recognised directly in reserves in respect of subsidiaries acquired
\nbefore 1\u00a0August 1998 of \u00a3478m (FY2022: \u00a3478m), to eliminate the Group\u2019s investment in ICU
\nMedical, Inc. equity and deferred consideration contingent on the future share price performance
\nof ICU Medical, Inc. and to eliminate post-retirement benefit assets and liabilities and non-
\nheadline litigation provisions related to John Crane, Inc. and Titeflex Corporation, both net of
\nrelated tax, and net debt.
\nNotes
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNet assets
2,406
2,721
\nAdjust for:
\nGoodwill recognised directly in reserves
478
478
\nRetirement benefit assets and obligations
8
(89)
(194)
\nTax related to retirement benefit assets and obligations
31
57
\nJohn Crane, Inc. litigation provisions and related tax
23
153
172
\nTiteflex Corporation litigation provisions and related tax
23
32
40
\nInvestment in ICU Medical, Inc. equity
14
(347)
(364)
\nDeferred contingent consideration
14
(13)
(19)
\nNet debt
18
387
150
\nCapital employed
3,038
3,041
\nRETURN ON CAPITAL EMPLOYED (ROCE)
\nNotes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nHeadline operating profit for previous 12 months \u2013 continuing
\noperations
501
417
\nAverage capital employed \u2013 continuing operations (excluding
\ninvestment in ICU Medical, Inc. equity)
1
3,196
2,940
\nROCE
15.7%
14.2%
\n
\n
\n
CREDIT METRICS
\nSmiths Group monitors the ratio of net debt to headline EBITDA as part of its management of
\ncredit ratings; see note 26 for details. This ratio is calculated as follows:
\nHeadline earnings before interest, tax, depreciation and amortisation (headline EBITDA)
\nNotes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nHeadline operating profit
501
417
\nExclude:
\n\u2013 depreciation of property, plant and equipment
12
42
38
\n\u2013 depreciation of right of use assets
13
32
30
\n\u2013 amortisation and impairment of development costs
10
2
3
\n\u2013 amortisation of software, patents and intellectual property
10
7
7
\nHeadline EBITDA
584
495
\nRatio of net debt to headline EBITDA
\nNotes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nHeadline EBITDA
584
495
\nNet debt
18
387
150
\nRatio of net debt to headline EBITDA
0.7
0.3
\n30. POST BALANCE SHEET EVENTS
\nDetails of the proposed final dividend announced since the end of the reporting period are given in
\nnote 25.
\nOn 30 August 2023, the Group completed the acquisition of HCP, see note 27 for details.
\n31. AUDIT EXEMPTION TAKEN FOR SUBSIDIARIES
\nThe following subsidiaries are exempt from the requirements of the Companies Act 2006 relating
\nto the audit of individual accounts by virtue of Section 479A of that Act for FY2023.
\nCompany name
Company number
\nEIS Group Plc
61407
\nFlexibox International Limited
394688
\nFlex-Tek Group Limited
11545405
\nGraseby Limited
894638
\nSI Properties Limited
160881
\nSITI 1 Limited
4257042
\nSmiths Detection Group Limited
5138140
\nSmiths Detection Investments Limited
5146644
\nSmiths Finance Limited
7888063
\nSmiths Group Finance EU Limited
10440573
\nSmiths Group Finance US Limited
10440608
\nSmiths Group Innovation Limited
10953689
\nSmiths Interconnect Group Limited
6641403
\nSmiths Pensions Limited
2197444",
"dimensions": {
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"f17526": {
"value": "GOING CONCERN The Directors are satisfied that the Group has adequate resources to continue to operate for a
\nperiod not less than 12 months from the date of approval of the financial statements and that
\nthere are no material uncertainties around their assessment. Accordingly, the Directors continue
\nto adopt the going concern basis of accounting.
\nThe Group\u2019s business activities, together with the factors likely to affect its future development,
\nperformance and position, are set out in the Strategic Report on pages 8 to 77. The Group\u2019s
\nfinancial position, cash-flows, liquidity and borrowing facilities are described in the CFO review
\nsection on pages 21 to 23.
\nOther factors considered by the Board as part of its going concern assessment included the
\ninherent uncertainties in cash-flow forecasts. Based on the above, the Directors have concluded
\nthat the Group is well placed to manage its financing and other business risks satisfactorily, and
\nthey have a reasonable expectation that the Group will have adequate resources to continue in
\noperation for at least 12 months from the signing date of these financial statements. They
\ntherefore consider it appropriate to adopt the going concern basis of accounting in preparing the
\nfinancial statements.",
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"f17545": {
"value": "KEY ESTIMATES AND SIGNIFICANT JUDGEMENTS The preparation of the accounts in conformity with generally accepted accounting principles
\nrequires management to make estimates and judgements that affect the reported amounts of
\nassets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts
\nand the reported amounts of revenues and expenses during the reporting period. Actual results
\nmay differ from these estimates.
\nThe key sources of estimation uncertainty together with the significant judgements and
\nassumptions used for these consolidated financial statements are set out below.",
"dimensions": {
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"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
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},
"f17546": {
"value": "KEY ESTIMATES AND SIGNIFICANT JUDGEMENTS The preparation of the accounts in conformity with generally accepted accounting principles
\nrequires management to make estimates and judgements that affect the reported amounts of
\nassets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts
\nand the reported amounts of revenues and expenses during the reporting period. Actual results
\nmay differ from these estimates.
\nThe key sources of estimation uncertainty together with the significant judgements and
\nassumptions used for these consolidated financial statements are set out below.
\nSOURCES OF ESTIMATION UNCERTAINTY
\nIMPAIRMENT REVIEWS OF INTANGIBLE ASSETS
\nIn carrying out impairment reviews of intangible assets, a number of significant assumptions have to
\nbe made when preparing cash-flow projections to determine the value in use of the asset or cash
\ngenerating unit (CGU). These include the future rate of market growth, discount rates, the market
\ndemand for the products acquired, the future profitability of acquired businesses or products,
\nlevels of reimbursement, and success in obtaining regulatory approvals. If actual results differ or
\nchanges in expectations arise, impairment charges may be required which would adversely impact
\noperating results.
\nCritical estimates, and the effect of variances in these estimates, are disclosed in note\u00a011.
\nRETIREMENT BENEFITS
\nDetermining the value of the future defined benefit obligation involves significant estimates in
\nrespect of the assumptions used to calculate present values. These include future mortality,
\ndiscount rate and inflation. The Group uses previous experience and independent actuarial advice
\nto select the values for critical estimates. A portion of UK pension liabilities are insured via bulk
\nannuity policies that match all or part of the scheme obligation to identified groups of pensioners.
\nThese assets are valued by an external qualified actuary at the actuarial valuation of the
\ncorresponding liability, reflecting this matching relationship.
\nThe Group\u2019s principal defined benefit pension plans are in the UK and the US and these have been
\nclosed so that no future benefits are accrued. Critical estimates for these plans, and the effect of
\nvariances in these estimates, are disclosed in note\u00a08.
\nPROVISIONS FOR LIABILITIES AND CHARGES
\nThe Group has made provisions for claims and litigations where it has had to defend itself against
\nproceedings brought by other parties. These provisions have been made for the best estimate of
\nthe expected expenditure required to settle each obligation, although there can be no guarantee
\nthat such provisions (which may be subject to potentially material revision from time to time) will
\naccurately predict the actual costs and liabilities that may be incurred. The most significant of
\nthese litigation provisions are described below.
\nJohn Crane, Inc. (JCI), a subsidiary of the Group, is one of many co-defendants in litigation relating
\nto products previously manufactured which contained asbestos. Provision of \u00a3204m (FY2022:
\n\u00a3229m) has been made for the future defence costs which the Group is expected to incur and the
\nexpected costs of future adverse judgements against JCI. Whilst well-established incidence
\ncurves can be used to estimate the likely future pattern of asbestos-related disease, JCI\u2019s claims
\nexperience is significantly impacted by other factors which influence the US litigation
\nenvironment. These can include: changing approaches on the part of the plaintiffs\u2019 bar; changing
\nattitudes amongst the judiciary at both trial and appellate levels; and legislative and procedural
\nchanges in both the state and federal court systems. Because of the significant uncertainty
\nassociated with the future level of asbestos claims and of the costs arising out of the related
\nlitigation, there can be no guarantee that the assumptions used to estimate the provision will
\nresult in an accurate prediction of the actual costs that will be incurred.
\nIn quantifying the expected costs JCI takes account of the advice of an expert in asbestos liability
\nestimation. The following estimates were made in preparing the provision calculation:
\n\u2013
The period over which the expenditure can be reliably estimated is judged to be ten years,
\nbased on past experience regarding significant changes in the litigation environment that
\nhave occurred every few years and on the amount of time taken in the\u00a0past for some of those
\nchanges to impact the broader asbestos litigation environment. See note 23 for a sensitivity
\nanalysis showing the impact on the provision of reducing or increasing this\u00a0time horizon; and
\n\u2013
The future trend of legal costs, the rate of future claims filed, the rate of successful resolution
\nof claims, and the average amount of\u00a0judgements awarded have been projected based on the
\npast history of JCI claims and well-established tables of asbestos incidence projections, since
\nthis is the best available evidence. Claims history from other defendants is not used to calculate
\n
\n
\n
the provision because JCI\u2019s defence strategy generates a significantly different pattern of legal
\ncosts and settlement expenses. See note\u00a023 for a sensitivity analysis showing the range of
\nexpected future spend.
\nTiteflex Corporation, a subsidiary of the Group in the Flex-Tek division, has received a number of
\nclaims from insurance companies seeking recompense on a subrogated basis for the effects of
\ndamage allegedly caused by lightning strikes in relation to its flexible gas piping product. It has
\nalso received a number of product liability claims regarding this product, some in the form of
\npurported class actions. Titeflex Corporation believes that its products are a safe and effective
\nmeans of delivering gas when installed in accordance with the manufacturer\u2019s instructions and
\nlocal and national codes; however, some claims have been settled on an individual basis without
\nadmission of liability. Provision of \u00a341m (FY2022: \u00a352m) has been made for the costs which the
\nGroup is expected to incur in respect of these claims. In preparing the provision calculation, key
\nestimates have been made about the impact of safe installation initiatives on the level of future
\nclaims. See note 23 for a sensitivity analysis showing the impact on the provision of reducing or
\nincreasing the expected impact. However, because of\u00a0the significant uncertainty associated with
\nthe future level of claims, there can be no guarantee that the assumptions used to estimate the
\nprovision will result in an accurate prediction of the actual costs that may be incurred.
\nTAXATION
\nThe Group has recognised deferred tax assets of \u00a375m (FY2022:\u00a0\u00a3103m) relating to losses and
\n\u00a360m (FY2022: \u00a369m) relating to the John Crane, Inc. and Titeflex Corporation litigation
\nprovisions. The recognition of assets pertaining to these items requires management to make
\nsignificant estimates as to the likelihood of realisation of these deferred tax assets and the
\nphasing and attribution of future taxable profits. This is based on a number of factors, which
\nmanagement use to assess the expectation that the benefit of these assets will be realised,
\nincluding expected future levels of operating profit, expenditure on litigation, pension
\ncontributions and the timing of the unwind of other tax positions.
\nTaxation liabilities included provisions of \u00a346m (FY2022: \u00a338m), the majority of which related to
\nthe risk of challenge to the geographic allocation of profits by tax authorities.
\nIn addition to the risks provided for, the Group faces a variety of other tax risks, which result from
\noperating in a complex global environment, including the ongoing reform of both international and
\ndomestic tax rules, new and ongoing tax audits in the Group\u2019s larger markets and the challenge to
\nfulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of
\nthe Group\u2019s global operations.
\nThe Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24
\nmonths. Due to the uncertainty associated with such tax items, it is possible that the conclusion
\nof\u00a0open tax matters may result in a final outcome that varies significantly from the amounts
\nnoted\u00a0above.
\nREVENUE RECOGNITION
\nRevenue is recognised as the performance obligations to deliver products or services are satisfied
\nand revenue is recorded based on the amount of consideration expected to be received in exchange
\nfor satisfying the performance obligations.
\nSmiths Detection and Smiths Interconnect have multi-year contractual arrangements for the sale
\nof\u00a0goods and services. Where these contracts have separately identifiable components with distinct
\npatterns of delivery and customer acceptance, revenue is accounted for separately for each
\nidentifiable component.
\nThe Group enters into certain contracts for agreed fees that are performed across more than one
\naccounting period and revenue is recognised over time. Estimates are required at the balance sheet
\ndate when determining the stage of completion of the contract activity. This assessment requires the
\nexpected total costs of the contract and the remaining costs to complete the contract to be estimated.
\nAt 31 July 2023, the Group held contracts with a total value of \u00a3109m (2022: \u00a3181m), of which
\n\u00a383m\u00a0(2022: \u00a3135m) had been delivered and \u00a326m (2022: \u00a347m) remains fully or partially
\nunsatisfied. \u00a324m of the unsatisfied amount is expected to be recognised in the coming year, with
\nthe remainder being recognised within two years. A 5% increase in the remaining cost to complete
\nthe contracts would have reduced Group operating profit in the current year by less than \u00a31m
\n(2022:\u00a0less than \u00a32m).
\nVALUATION OF FINANCIAL ASSETS
\nFollowing the sale of Smiths Medical the Group has recognised a financial asset for the fair value of
\nthe US$100m additional sales consideration that is contingent on the future share price
\nperformance of the enlarged ICU Medical, Inc (ICU) business.
\nThe earnout requires the Group to retain beneficial ownership of at least 1.25 million ICU shares and
\nfor the ICU share price to average US$300 or more for any 30-day period during the first three years
\npost-completion, or for any 45-day period in the fourth year post-completion.
\nAn external valuation firm has been engaged to undertake Monte Carlo valuation simulations in
\norder to estimate the probability of the future ICU share price exceeding US$300. These valuation
\nsimulations have determined a fair value of \u00a313m (US$17m).",
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},
"f17559": {
"value": "IMPAIRMENT REVIEWS OF INTANGIBLE ASSETS In carrying out impairment reviews of intangible assets, a number of significant assumptions have to
\nbe made when preparing cash-flow projections to determine the value in use of the asset or cash
\ngenerating unit (CGU). These include the future rate of market growth, discount rates, the market
\ndemand for the products acquired, the future profitability of acquired businesses or products,
\nlevels of reimbursement, and success in obtaining regulatory approvals. If actual results differ or
\nchanges in expectations arise, impairment charges may be required which would adversely impact
\noperating results.
\nCritical estimates, and the effect of variances in these estimates, are disclosed in note\u00a011.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17678": {
"value": "REVENUE RECOGNITION Revenue is recognised as the performance obligations to deliver products or services are satisfied
\nand revenue is recorded based on the amount of consideration expected to be received in exchange
\nfor satisfying the performance obligations.
\nSmiths Detection and Smiths Interconnect have multi-year contractual arrangements for the sale
\nof\u00a0goods and services. Where these contracts have separately identifiable components with distinct
\npatterns of delivery and customer acceptance, revenue is accounted for separately for each
\nidentifiable component.
\nThe Group enters into certain contracts for agreed fees that are performed across more than one
\naccounting period and revenue is recognised over time. Estimates are required at the balance sheet
\ndate when determining the stage of completion of the contract activity. This assessment requires the
\nexpected total costs of the contract and the remaining costs to complete the contract to be estimated.
\nAt 31 July 2023, the Group held contracts with a total value of \u00a3109m (2022: \u00a3181m), of which
\n\u00a383m\u00a0(2022: \u00a3135m) had been delivered and \u00a326m (2022: \u00a347m) remains fully or partially
\nunsatisfied. \u00a324m of the unsatisfied amount is expected to be recognised in the coming year, with
\nthe remainder being recognised within two years. A 5% increase in the remaining cost to complete
\nthe contracts would have reduced Group operating profit in the current year by less than \u00a31m
\n(2022:\u00a0less than \u00a32m).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17712": {
"value": "BUSINESS COMBINATIONS On the acquisition of a business, the Group has to make judgements on the identification of specific
\nintangible assets which are recognised separately from goodwill and then amortised over their
\nestimated useful lives. These include items such as brand names and customer lists, to which
\nvalue is first attributed at the time of acquisition. The capitalisation of these assets and the related
\namortisation charges are based on judgements about the value and economic life of such items.
\nWhere acquisitions are significant, appropriate advice is sought from professional advisers before
\nmaking such allocations.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17763": {
"value": "CAPITALISATION OF DEVELOPMENT COSTS Expenditure incurred in the development of major new products is capitalised as internally
\ngenerated intangible assets only when it has been judged that strict criteria are met, specifically
\nin relation to the products\u2019 technical feasibility and commercial viability (the ability to generate
\nprobable future economic benefits).
\nThe assessment of technical feasibility and future commercial viability of development projects
\nrequires significant judgement and the use of assumptions. Key judgements made in the
\nassessment of future commercial viability include:
\n\u2013
Scope of work to achieve regulatory clearance (where required) \u2013 including the level of testing
\nevidence and documentation;
\n\u2013
Competitor activity \u2013 including the impact of potential competitor product launches on the
\nmarketplace and customer demand; and
\n\u2013
Launch timeline \u2013 including time and resource required to establish and support the
\ncommercial launch of a new product.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfResearchAndDevelopmentExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17806": {
"value": "SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION
\nThe Group\u2019s consolidated accounts include the financial statements of Smiths Group plc (the
\n\u2018Company\u2019) and all entities controlled by the Company (its subsidiaries). A list of the subsidiaries
\nof Smiths Group plc is provided on pages 205 to 210.
\nThe Company controls an entity when it (i) has power over the entity; (ii) is exposed or has rights to
\nvariable returns from its involvement with the entity; and (iii) has the ability to affect those returns
\nthrough its power over the entity. The Group reassesses whether or not it controls a subsidiary if
\nfacts and circumstances indicate that there are changes to one or more of these three elements
\nof control. Subsidiaries are fully consolidated from the date on which control is obtained by the
\nCompany to the date that control ceases.
\nWhere the Group loses control of a subsidiary, the assets and liabilities are derecognised along
\nwith any related non-controlling interest and other components of equity. Any resulting gain or
\nloss is recognised in the income statement. Any interest retained in the former subsidiary is
\nmeasured at fair value when control is lost.
\nThe non-controlling interests in the Group balance sheet represent the share of net assets of
\nsubsidiary undertakings held outside the Group. The movement in the year comprises the profit
\nattributable to such interests together with any dividends paid, movements in respect of corporate
\ntransactions and related exchange differences.
\nInterests in associates are accounted for using the equity method. They are initially recognised at
\ncost, which includes transaction costs. Subsequent to initial recognition, the Group financial
\nstatements include the Group\u2019s share of the profit or loss and other comprehensive income of
\nequity-accounted investees, until the date on which significant influence ceases.
\nAll intercompany transactions, balances, and gains and losses on transactions between Group
\ncompanies are eliminated on consolidation.
\n
\n
\n
FOREIGN CURRENCIES
\nThe Company\u2019s presentational currency and functional currency is sterling. The financial position
\nof all subsidiaries and associates that have a functional currency different from sterling are
\ntranslated into sterling at the rate of exchange at the date of that balance sheet, and the income
\nand expenses are translated at average exchange rates for the period. All resulting foreign
\nexchange rate movements are recognised as a separate component of equity.
\nForeign exchange rate movements arising on the translation of non-monetary assets and
\nliabilities held in hyperinflationary subsidiaries are recognised in OCI. The amounts taken to the
\nCTA reserve represent the combined effect of restatement and translation and are expressed as
\na net change for the year.
\nOn consolidation, foreign exchange rate movements arising from the translation of the net
\ninvestment in foreign entities, and of borrowings and other currency instruments designated as
\nhedges of such investments, are taken to shareholders\u2019 equity. When a foreign operation is sold,
\nthe cumulative amount of such foreign exchange rate movements is recognised in the income
\nstatement as part of the gain or loss on sale.
\nForeign exchange rate movements arising on transactions are recognised in the income
\nstatement. Those arising on trading are taken to operating profit; those arising on borrowings are
\nclassified as finance income or cost.
\nREVENUE
\nRevenue is measured at the fair value of the consideration received, net of trade discounts
\n(including distributor rebates) and sales taxes. Revenue is discounted only where the impact of
\ndiscounting is material.
\nWhen the Group enters into complex contracts with multiple, separately identifiable components,
\nthe terms of the contract are reviewed to determine whether or not the elements of the contract
\nshould be accounted for separately. If a contract is being split into multiple components, the
\ncontract revenue is allocated to the different components at the start of the contract. The basis of
\nallocation depends on the substance of the contract. The Group considers relative stand-alone
\nselling prices, contractual prices and relative cost when allocating revenue.
\nThe Group has identified the following different types of revenue:
\n(i) Sale of goods recognised at a point in time \u2013 generic products manufactured by Smiths
\nGeneric products are defined as either:
\n\u2013
Products that are not specific to any particular customer;
\n\u2013
Products that may initially be specific to a customer but can be reconfigured at minimal cost,
\ni.e., retaining a margin, for sale to an alternative customer; or
\n\u2013
Products that are specific to a customer but are manufactured at Smiths risk, i.e., we have no
\nright to payment of costs plus margin if the customer refuses to take control of the goods.
\nFor established products with simple installation requirements, revenue is recognised when
\ncontrol of the product is passed to the customer. The point in time that control passes is defined in
\naccordance with the agreed shipping terms and is determined on a case-by-case basis. The time
\nof dispatch or delivery of the goods to the customer is normally the point at which invoicing
\noccurs. However for some generic products, revenue is recognised when the overall
\nperformance obligation has been completed, which is often after the customer has completed its
\nacceptance procedures and has assumed control.
\nProducts that are sold under multiple element arrangements, i.e., contracts involving a
\ncombination of products and services, are bundled into a single performance obligation
\nunless\u00a0the customer can benefit from the goods or services either on their own, or together with
\nother resources that are readily available to the customer and are distinct within the context of
\nthe contract.
\nFor contracts that pass control of the product to the customer only on completion of installation
\nservices, revenue is recognised upon completion of the installation.
\nAn obligation to replace or repair faulty products under the standard warranty terms is
\nrecognised as a provision. If the contract includes terms that either extend the warranty beyond
\nthe standard term or imply that maintenance is provided to keep the product working, these are
\nservice warranties and revenue is deferred to cover the performance obligation in an amount
\nequivalent to the stand-alone selling price of that service.
\n(ii) Sale of goods recognised over time \u2013 customer-specific products where the contractual
\nterms include rights to payment for work performed\u00a0to date
\nCustomer-specific products are defined as being:
\n\u2013
Products that cannot be reconfigured economically such that it remains profitable to sell to
\nanother customer;
\n\u2013
Products that cannot be sold to another customer due to contractual restrictions; and
\n\u2013
Products that allow Smiths to charge for the work performed to date in an amount that
\nrepresents the costs incurred to date plus a margin, should the customer refuse to take control
\nof the goods.
\nFor contracts that meet the terms listed above, revenue is recognised over the period that the
\nGroup is engaged in the manufacture of the product, calculated using the input method based on
\nthe amount of costs incurred to date compared to the overall costs of the contract. This is
\nconsidered to be a faithful depiction of the transfer of the goods to the customer as the costs
\nincurred, total expected costs and total order value are known. The time of dispatch or delivery of
\nthe goods to the customer is normally the point at which invoicing occurs.
\nAn obligation to provide a refund for faulty products under the standard warranty terms is
\nrecognised as a provision. If the contract includes terms that either extend the warranty beyond
\nthe standard term or imply that maintenance is provided to keep the product working, these are
\nservice warranties and revenue is deferred to cover the performance obligation in an amount
\nequivalent to the stand-alone selling price of that service.
\n(iii) Services recognised over time \u2013 services relating to the installation, repair and ongoing
\nmaintenance of equipment
\nServices include installation, commissioning, testing, training, software hosting and
\nmaintenance, product repairs and contracts undertaking extended warranty services.
\n
\n
\n
For complex installations where the supply of services cannot be separated from the supply of
\nproduct, revenue is recognised upon acceptance of the combined performance obligation (see
\nSale of goods (i) above).
\nFor services that can be accounted for as a separate performance obligation, revenue is
\nrecognised over time, assessed on the basis of the actual service provided as a proportion of the
\ntotal services to be provided.
\nDepending on the nature of the contract, revenue is recognised as follows:
\n\u2013
Installation, commissioning and testing services (when neither linked to the supply of product
\nnor subject to acceptance) are recognised rateably as the services are provided;
\n\u2013
Training services are recognised on completion of the training course;
\n\u2013
Software hosting and maintenance services are recognised rateably over the life of the
\ncontract;
\n\u2013
Product repair services, where the product is returned to Smiths premises for remedial action,
\nare recognised when the product is returned to the customer and they regain control of the
\nasset;
\n\u2013
Onsite ad hoc product repair services are recognised rateably as the services are performed;
\n\u2013
Long-term product repair and maintenance contracts are recognised rateably over the
\ncontract term; and
\n\u2013
Extended service warranties are recognised rateably over the contract term.
\nInvoicing for services depends on the nature of the service provided with some services charged
\nin advance and others in arrears.
\nWhere contracts are accounted for under the revenue recognised over time basis, the proportion
\nof costs incurred is used to determine the percentage of contract completion.
\nContracts for the construction of substantial assets, which normally last in excess of one year, are
\naccounted for under the revenue recognised over time basis, using an input method.
\nFor fixed-price contracts, revenue is recognised based upon an assessment of the amount of cost
\nincurred under the contract, compared to the total expected costs that will be incurred under the
\ncontract. This calculation is applied cumulatively with any over/under recognition being adjusted
\nin the current period.
\nFor cost-plus contracts, revenue is recognised based upon costs incurred to date plus any
\nagreed\u00a0margin.
\nFor both fixed-price and cost-plus contracts, invoicing is normally based on a schedule with
\nmilestone payments.
\nCONTRACT COSTS
\nThe Group has taken the practical expedient of not capitalising contract costs as they are
\nexpected to be expensed within one year from the date of signing.
\nLEASES
\nLease liabilities are initially measured at the present value of the future lease payments at the
\ncommencement date, discounted by using either the rate implicit in the lease, or if not observable,
\nthe Group\u2019s incremental borrowing rate. Lease payments comprise contractual lease payments;
\nvariable lease payments that depend on an index or rate, initially measured using the index or rate
\nat the commencement date; and the amount expected to be payable under residual value
\nguarantees.
\nRight of use assets are measured at commencement date at the amount of the corresponding
\nlease liability and initial direct costs incurred. Right of use assets are depreciated over the shorter
\nof the lease term and the useful life of the right of use assets, unless there is a transfer of
\nownership or purchase option which is reasonably certain to be exercised at the end of the lease
\nterm, in which case depreciation is charged over the useful life of the underlying asset. Right of
\nuse assets are subject to impairment.
\nWhen a lease contract is modified, either from a change to the duration of the lease or a change to
\namounts payable, the Group remeasures the lease liability by discounting the revised future lease
\npayments at a revised discount rate. A corresponding adjustment is made to the carrying value of
\nthe related right of use asset.
\nLeases of buildings typically have lease terms between one and seven years, while plant and
\nmachinery generally have lease terms between one and three years. The Group also has certain
\nleases of machinery with lease terms of 12 months or less and leases of office equipment with
\nlow value (typically below \u00a35,000). The Group applies the \u2018short-term lease\u2019 and \u2018lease of low-
\nvalue assets\u2019 recognition exemptions for these leases and recognises the lease payments
\nassociated with these leases as an expense on a straight-line basis over the lease term.
\nInterest on lease liabilities is presented as a financing activity in the Consolidated Cash-Flow
\nStatement, included under the heading lease payments.
\nTAXATION
\nThe charge for taxation is based on profits for the year and takes into account taxation deferred
\nbecause of temporary differences between the treatment of certain items for taxation and
\naccounting purposes.
\nCurrent income tax assets and liabilities are measured at the amount expected to be recovered
\nfrom or paid to taxation authorities. Tax benefits are not recognised unless it is likely that the tax
\npositions are sustainable. Tax positions taken are then reviewed to assess whether a provision
\nshould be made based on prevailing circumstances. Tax provisions are included in current tax
\nliabilities. The tax rates and tax laws used to compute the amount are those that are enacted or
\nsubstantively enacted, at the reporting date in the countries where the Group operates and
\ngenerates taxable income.
\nThe Group operates and is subject to taxation in many countries. Tax legislation is different in each
\ncountry, is often complex and is subject to interpretation by management and government
\nauthorities. These matters of judgement give rise to the need to create provisions for uncertain
\ntax positions which are recognised when it is considered more likely than not that there will be a
\nfuture outflow of funds to a taxing authority. Provisions are made against individual exposures
\n
\n
\n
and take into account the specific circumstances of each case, including the strength of technical
\narguments, recent case law decisions or rulings on similar issues and relevant external advice.
\nThe amounts are measured using one of the following methods, depending on which of the
\nmethods the Directors expect will better reflect the amount the Group will pay to the tax authority:
\n\u2013
The single best estimate method is used where there is a single outcome that is more likely
\nthan not to occur. This will happen, for example, where the tax outcome is binary or the range of
\npossible outcomes is very limited; or
\n\u2013
Alternatively, a probability weighted expected value is used where, on the balance of
\nprobabilities, there will be a payment to the tax authority but there are a number of possible
\noutcomes. In this case, a probability is assigned to each of the outcomes and the amount
\nprovided is the sum of these risk-weighted amounts. In assessing provisions against uncertain
\ntax positions, management uses in-house tax experts, professional firms and previous
\nexperience of the taxing authority to evaluate the risk.
\nDeferred tax is provided in full using the balance sheet liability method. A deferred tax asset is
\nrecognised where it is probable that future taxable income will be sufficient to utilise the available
\nrelief. Tax is charged or credited to the income statement except when it relates to items charged
\nor credited directly to equity, in which case the tax is also dealt with in equity.
\nDeferred tax is provided on temporary differences arising on investments in subsidiaries and
\nassociates, except where the timing of the reversal of the temporary differences is controlled by
\nthe Company and it is probable that the temporary difference will not reverse in the foreseeable
\nfuture. Deferred tax liabilities and assets are not discounted.
\nIAS 12\u00a0International Tax Reform: Pillar Two Model Rules.
\nOn 19th July 2023, the UK Endorsement Board adopted the Amendments to IAS 12\u00a0International
\nTax Reform: Pillar Two Model Rules, issued by the IASB in May 2023. The Amendments introduce
\na temporary mandatory exception from accounting for deferred taxes arising from the Pillar Two
\nmodel rules and the Group has applied this exception to recognising and disclosing information
\nabout deferred tax assets and liabilities related to Pillar Two income taxes.
\nEMPLOYEE BENEFITS
\nShare-based compensation
\nThe fair value of the shares or share options granted is recognised as an expense over the vesting
\nperiod to reflect the value of the employee services received. The fair value of options granted,
\nexcluding the impact of any non-market vesting conditions, is calculated using established option
\npricing models, principally binomial models. The probability of meeting non-market vesting
\nconditions, which include profitability targets, is used to estimate the number of share options
\nwhich are likely to vest.
\nFor cash-settled share-based payment, a liability is recognised based on the fair value of the
\npayment earned by the balance sheet date. For equity-settled share-based payment, the
\ncorresponding credit is recognised directly in reserves.
\nPension obligations and post-retirement benefits
\nPensions and similar benefits (principally healthcare) are accounted for under IAS 19. The
\nretirement benefit obligation in respect of the defined benefit plans is the liability (the present
\nvalue of all expected future obligations) less the fair value of the plan assets.
\nThe income statement expense is allocated between current service costs, reflecting the
\nincrease in liability due to any benefit accrued by employees in the current period, any past
\nservice costs/credits and settlement losses or gains which are recognised immediately, and the
\nscheme administration costs.
\nActuarial gains and losses are recognised in the statement of comprehensive income in the year
\nin which they arise. These comprise the impact on the liabilities of changes in demographic and
\nfinancial assumptions compared with the start of the year, actual experience being different to
\nassumptions and the return on plan assets being above or below the amount included in the net
\npension interest cost.
\nPayments to defined contribution schemes are charged as an income statement expense as they
\nfall due.
\nINTANGIBLE ASSETS
\nGoodwill
\nGoodwill represents the excess of the cost of an acquisition over the fair value of the Group\u2019s
\nshare of the identifiable net assets of the acquired subsidiary at the date of acquisition.
\nThe goodwill arising from acquisitions of subsidiaries after 1 August 1998 is included in intangible
\nassets, tested annually for impairment and carried at cost less accumulated impairment losses.
\nGains and losses on the disposal of an entity include the carrying amount of goodwill relating to
\nthe entity sold. The goodwill arising from acquisitions of subsidiaries before 1 August 1998 was
\nset against reserves in the year of acquisition.
\nGoodwill is tested for impairment at least annually. Should the test indicate that the net realisable
\nvalue of the CGU is less than current carrying value, an impairment loss will be recognised
\nimmediately in the income statement. Subsequent reversals of impairment losses for goodwill
\nare not recognised.
\nResearch and development
\nExpenditure on research and development is charged to the income statement in the year in
\nwhich it is incurred with the exception of:
\n\u2013
Amounts recoverable from third parties; and
\n\u2013
Expenditure incurred in respect of the development of major new products where the outcome
\nof those projects is assessed as being reasonably certain as regards viability and technical
\nfeasibility. Such expenditure is capitalised and amortised over the estimated period of sale
\nfor each product, commencing in the year that the product is ready for sale. Amortisation is
\ncharged straight line\u00a0or based on the units produced, depending on the nature of the product
\nand the availability of reliable estimates of\u00a0production\u00a0volumes.
\n
\n
\n
The cost of development projects which are expected to take a substantial period of time to
\ncomplete includes attributable borrowing\u00a0costs.
\nIntangible assets acquired in business combinations
\nThe identifiable net assets acquired as a result of a business combination may include intangible
\nassets other than goodwill. Any such intangible assets are amortised straight line over their
\nexpected useful lives as follows:
\nPatents, licences and trademarks
up to 20 years
\nTechnology
up to 13 years
\nCustomer relationships
up to 15 years
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
\nSoftware, patents and intellectual property
\nThe estimated useful lives are as follows:
\nSoftware
up to seven years
\nPatents and intellectual property
\nshorter of the economic life and the period the right is
\nlegally enforceable
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
\nPROPERTY, PLANT AND EQUIPMENT
\nProperty, plant and equipment are stated at historical cost less accumulated depreciation and
\nany recognised impairment losses.
\nLand is not depreciated. Depreciation is provided on other assets estimated to write off the
\ndepreciable amount of relevant assets by equal annual instalments over their estimated useful
\nlives. In general, the rates used are:
\nFreehold and long leasehold buildings
2% per annum
\nShort leasehold property
over the period of the lease
\nPlant, machinery, etc.
10% to 20% per annum
\nFixtures, fittings, tools and other equipment
10% to\u00a033% per annum
\nThe cost of any assets which are expected to take a substantial period of time to complete
\nincludes attributable borrowing costs.
\nThe assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at each
\nbalance sheet date. An asset\u2019s carrying amount is written down immediately to its recoverable
\namount if the asset\u2019s carrying amount is greater than its estimated recoverable\u00a0amount.
\nINVENTORIES
\nInventories are stated at the lower of cost and net realisable value. Cost is determined using the
\nfirst-in, first-out method. The cost of finished goods and work in progress comprises raw
\nmaterials, direct labour, other direct costs and related production overheads (based on normal
\noperating capacity). The cost of items of inventory which take a substantial period of time to
\ncomplete includes attributable borrowing costs.
\nThe net realisable value of inventories is the estimated selling price in the ordinary course of
\nbusiness, less applicable variable selling expenses. Provisions are made for any slow-moving,
\nobsolete or defective inventories.
\nTRADE AND OTHER RECEIVABLES
\nTrade receivables and contract assets are either classified as \u2018held to collect\u2019 and initially
\nrecognised at fair value and subsequently measured at amortised cost, less any appropriate
\nprovision for expected credit losses or as \u2018held to collect and sell\u2019 and measured at fair value
\nthrough other comprehensive income (FVOCI).
\nA provision for expected credit losses is established when there is objective evidence that it will
\nnot be possible to collect all amounts due according to the original payment terms. Expected
\ncredit losses are determined using historical write-offs as a basis, adjusted for factors that are
\nspecific to the debtor, general economic conditions of the industry in which the debtor operates
\nand with a default risk multiplier applied to reflect country risk premium. The Group applies the
\nIFRS 9 simplified lifetime expected credit loss approach for trade receivables and contract assets
\nwhich do not contain a significant financing component
\nPROVISIONS
\nProvisions are recognised when the Group has a present obligation (legal or constructive) as a
\nresult of a past event, it is probable that an outflow of resources embodying economic benefits
\nwill be required to settle the obligation, and a reliable estimate can be made of the amount of the
\nobligation. Where the Group expects some or all of a provision to be reimbursed, for example
\nunder an insurance contract, the reimbursement is recognised as a separate asset but only when
\nthe reimbursement is virtually certain.
\nProvisions for warranties and product liability, disposal indemnities, restructuring costs, property
\ndilapidations and legal claims are recognised when: the Company has a legal or constructive
\nobligation as a result of a past event; it is probable that an outflow of resources will be required to
\nsettle the obligation; and the amount has been reliably estimated. Provisions are not recognised
\nfor future operating losses.
\nProvisions are discounted where the time value of money is material.
\nWhere there is a number of similar obligations, for example where a warranty has been given, the
\nlikelihood that an outflow will be required in settlement is determined by considering the class of
\nobligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
\nto any one item included in the same class of obligations may be small.
\nDISCONTINUED OPERATIONS
\nA discontinued operation is either:
\n\u2013
A component of the Group\u2019s business that represents a separate major line of business or
\ngeographical area of operations that has been disposed of, has been abandoned or meets the
\ncriteria to be classified as held for sale; or
\n\u2013
A business acquired solely for the purpose of selling it.
\n
\n
\n
Discontinued operations are presented on the income statement as\u00a0a\u00a0separate line and are
\nshown net of tax.
\nIn accordance with IAS 21, gains and losses on intra-group monetary assets and liabilities are not
\neliminated. Therefore foreign exchange rate movements on intercompany loans with discontinued
\noperations are presented on the income statement as non-headline finance cost items.
\nCASH AND CASH EQUIVALENTS
\nCash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing
\nsecurities with maturities of three months or less.
\nIn the cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which
\nare included as current borrowings in liabilities on the balance sheet.
\nFINANCIAL ASSETS
\nThe classification of financial assets depends on the purpose for which the assets were acquired.
\nManagement determines the classification of an asset at initial recognition and re-evaluates the
\ndesignation at each reporting date. Financial assets are classified as: measured at amortised
\ncost, fair value through other comprehensive income or fair value through profit and loss.
\nFinancial assets primarily include trade receivables, cash and cash equivalents (comprising cash
\nat bank, money-market funds, and short-term deposits), short-term investments, derivatives
\n(foreign exchange contracts and interest rate derivatives) and unlisted investments.
\n\u2013
Trade receivables are classified either as \u2018held to collect\u2019 and measured at amortised cost or
\nas \u2018held to collect and sell\u2019 and measured at fair value through other comprehensive income
\n(FVOCI). The Group may sell trade receivables due from certain customers before the due date.
\nAny trade receivables from such customers that are not sold at the reporting date are classified
\nas \u2018held to collect and sell\u2019.
\n\u2013
Cash and cash equivalents (consisting of balances with banks and other financial institutions,
\nmoney-market funds and short-term deposits) and short-term investments are subject to low
\nmarket risk. Cash balances, short-term deposits and short-term investments are measured at
\namortised cost. Money market funds are measured at fair value through profit and loss (FVPL).
\n\u2013
Derivatives are measured at FVPL.
\n\u2013
Listed and unlisted investments are measured at FVOCI.
\n\u2013
Deferred contingent consideration are measured at FVPL.
\nFinancial assets are derecognised when the right to receive cash-flows from the assets has
\nexpired, or has been transferred, and the Group has transferred substantially all of the risks and
\nrewards of ownership.
\nOn initial recognition, the Group may make an irrevocable election to designate certain
\ninvestments as FVOCI, if they are not held for trading or relate to contingent consideration on a
\nbusiness combination. When securities measured at FVOCI are sold or impaired, the
\naccumulated fair value adjustments remain in reserves.
\nFinancial assets are classified as current if they are expected to be realised within 12 months of
\nthe balance sheet date.
\nFINANCIAL LIABILITIES
\nBorrowings are initially recognised at the fair value of the proceeds, net of related transaction
\ncosts. These transaction costs, and any discount or premium on issue, are subsequently
\namortised under the effective interest rate method through the income statement as interest over
\nthe life of the loan and added to the liability disclosed in the balance sheet. Related accrued
\ninterest is included in the borrowings figure.
\nBorrowings are classified as current liabilities unless the Group has an unconditional right to
\ndefer settlement of the liability for at least one year after the balance sheet date.
\nDERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
\nThe Group uses derivative financial instruments to hedge its exposures to foreign exchange and
\ninterest rates arising from its operating and financing activities.
\nDerivative financial instruments are initially recognised at fair value on the date a derivative
\ncontract is entered into and are subsequently re-measured at their fair value. The method of
\nrecognising any resulting gain or loss depends on whether the derivative financial instrument is
\ndesignated as a hedging instrument and, if so, the nature of the item being hedged.
\nWhere derivative financial instruments are designated into hedging relationships, the Group
\nformally documents the following:
\n\u2013
The risk management objective and strategy for entering the hedge;
\n\u2013
The nature of the risks being hedged and the economic relationship between the hedged item
\nand the hedging instrument; and
\n\u2013
Whether the change in cash-flows of the hedged item and hedging instrument are expected to
\noffset each other.
\nChanges in the fair value of any derivative financial instruments that do not qualify for hedge
\naccounting are recognised immediately in the income statement.
\nFair value hedge
\nThe Group uses derivative financial instruments to convert part of its fixed rate debt to floating
\nrate in order to hedge the risks arising from its external borrowings.
\nThe Group designates these as fair value hedges of interest rate risk. Changes in the hedging
\ninstrument are recorded in the income statement, together with any changes in the fair values of
\nthe hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge
\nis effective. Gains or losses relating to any ineffectiveness are immediately recognised in the
\nincome statement.
\n
\n
\n
Cash-flow hedge
\nCash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
\nThe effective portions of changes in the fair values of derivatives that are designated and qualify as
\ncash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. Amounts accumulated in the hedge reserve are
\nrecycled in the income statement in the periods when the hedged items will affect profit or loss (for
\nexample, when the forecast sale that is hedged takes place).
\nIf a forecast transaction that is hedged results in the recognition of a non-financial asset (for
\nexample, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are
\ntransferred from the reserve and included in the initial measurement of the cost of the asset or
\nliability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
\nfor hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains
\nin the reserve and is recognised when the forecast transaction is ultimately recognised in the
\nincome statement.
\nWhen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
\nreported in other comprehensive income is immediately transferred to the income statement.
\nNet investment hedge
\nHedges of net investments in foreign operations are accounted for similarly to cash-flow hedges.
\nAny gain or loss on the hedging instrument relating to the effective portion of the hedge is
\nrecognised in other comprehensive income; the gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. When a foreign operation is disposed of, gains
\nand losses accumulated in equity related to that operation are included in the income statement
\nfor that period.
\nFAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
\nThe fair values of financial assets and financial liabilities are the amounts at which the instrument
\ncould be exchanged in a current transaction between willing parties, other than in a forced or
\nliquidation sale.
\nIFRS 13: \u2018Fair value measurement\u2019 requires fair value measurements to be classified according to
\nthe following hierarchy:
\n\u2013
Level 1 \u2013 quoted prices in active markets for identical assets or liabilities;
\n\u2013
Level 2 \u2013 valuations in which all inputs are observable either directly (i.e., as prices) or indirectly
\n(i.e., derived from prices); and
\n\u2013
Level 3 \u2013 valuations in which one or more inputs that are significant to the resulting value are
\nnot based on observable market data.
\nSee note 21 for information on the methods which the Group uses to estimate the fair values of its
\nfinancial instruments.
\nDIVIDENDS
\nDividends are recognised as a liability in the period in which they are authorised. The interim
\ndividend is recognised when it is paid and the final dividend is recognised when it has been
\napproved by shareholders at the Annual General Meeting.
\nNEW ACCOUNTING STANDARDS EFFECTIVE 2023
\nNo new accounting standards have been adopted in the financial year. The accounting policies
\nadopted in the preparation of these consolidated financial statements are consistent with those
\nfollowed in the previous financial year.
\nNEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
\nNo other new standards, new interpretations or amendments to standards or interpretations have
\nbeen published which are expected to have a significant impact on the Group\u2019s financial
\nstatements.
\nPARENT COMPANY
\nThe ultimate Parent Company of the Group is Smiths Group plc, a company incorporated in
\nEngland and Wales and listed on the London Stock Exchange.
\nThe accounts of the Parent Company, Smiths Group plc, have been prepared in accordance with
\nthe Companies Act 2006 and Financial Reporting Standard 101, \u2018Reduced Disclosure Framework\u2019.
\nThe Company accounts are presented in separate financial statements on pages 197 to 204. The
\nprincipal subsidiaries of the Parent Company are listed in the above accounts.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17809": {
"value": "BASIS OF CONSOLIDATION The Group\u2019s consolidated accounts include the financial statements of Smiths Group plc (the
\n\u2018Company\u2019) and all entities controlled by the Company (its subsidiaries). A list of the subsidiaries
\nof Smiths Group plc is provided on pages 205 to 210.
\nThe Company controls an entity when it (i) has power over the entity; (ii) is exposed or has rights to
\nvariable returns from its involvement with the entity; and (iii) has the ability to affect those returns
\nthrough its power over the entity. The Group reassesses whether or not it controls a subsidiary if
\nfacts and circumstances indicate that there are changes to one or more of these three elements
\nof control. Subsidiaries are fully consolidated from the date on which control is obtained by the
\nCompany to the date that control ceases.
\nWhere the Group loses control of a subsidiary, the assets and liabilities are derecognised along
\nwith any related non-controlling interest and other components of equity. Any resulting gain or
\nloss is recognised in the income statement. Any interest retained in the former subsidiary is
\nmeasured at fair value when control is lost.
\nThe non-controlling interests in the Group balance sheet represent the share of net assets of
\nsubsidiary undertakings held outside the Group. The movement in the year comprises the profit
\nattributable to such interests together with any dividends paid, movements in respect of corporate
\ntransactions and related exchange differences.
\nInterests in associates are accounted for using the equity method. They are initially recognised at
\ncost, which includes transaction costs. Subsequent to initial recognition, the Group financial
\nstatements include the Group\u2019s share of the profit or loss and other comprehensive income of
\nequity-accounted investees, until the date on which significant influence ceases.
\nAll intercompany transactions, balances, and gains and losses on transactions between Group
\ncompanies are eliminated on consolidation.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17812": {
"value": "Smiths Group plc",
"dimensions": {
"concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17813": {
"value": "plc",
"dimensions": {
"concept": "ifrs-full:LegalFormOfEntity",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17831": {
"value": "Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the Group financial
\nstatements include the Group\u2019s share of the profit or loss and other comprehensive income of
\nequity-accounted investees, until the date on which significant influence ceases.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17832": {
"value": "Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the Group financial
\nstatements include the Group\u2019s share of the profit or loss and other comprehensive income of
\nequity-accounted investees, until the date on which significant influence ceases.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17871": {
"value": "FOREIGN CURRENCIES The Company\u2019s presentational currency and functional currency is sterling. The financial position
\nof all subsidiaries and associates that have a functional currency different from sterling are
\ntranslated into sterling at the rate of exchange at the date of that balance sheet, and the income
\nand expenses are translated at average exchange rates for the period. All resulting foreign
\nexchange rate movements are recognised as a separate component of equity.
\nForeign exchange rate movements arising on the translation of non-monetary assets and
\nliabilities held in hyperinflationary subsidiaries are recognised in OCI. The amounts taken to the
\nCTA reserve represent the combined effect of restatement and translation and are expressed as
\na net change for the year.
\nOn consolidation, foreign exchange rate movements arising from the translation of the net
\ninvestment in foreign entities, and of borrowings and other currency instruments designated as
\nhedges of such investments, are taken to shareholders\u2019 equity. When a foreign operation is sold,
\nthe cumulative amount of such foreign exchange rate movements is recognised in the income
\nstatement as part of the gain or loss on sale.
\nForeign exchange rate movements arising on transactions are recognised in the income
\nstatement. Those arising on trading are taken to operating profit; those arising on borrowings are
\nclassified as finance income or cost.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17872": {
"value": "FOREIGN CURRENCIES The Company\u2019s presentational currency and functional currency is sterling. The financial position
\nof all subsidiaries and associates that have a functional currency different from sterling are
\ntranslated into sterling at the rate of exchange at the date of that balance sheet, and the income
\nand expenses are translated at average exchange rates for the period. All resulting foreign
\nexchange rate movements are recognised as a separate component of equity.
\nForeign exchange rate movements arising on the translation of non-monetary assets and
\nliabilities held in hyperinflationary subsidiaries are recognised in OCI. The amounts taken to the
\nCTA reserve represent the combined effect of restatement and translation and are expressed as
\na net change for the year.
\nOn consolidation, foreign exchange rate movements arising from the translation of the net
\ninvestment in foreign entities, and of borrowings and other currency instruments designated as
\nhedges of such investments, are taken to shareholders\u2019 equity. When a foreign operation is sold,
\nthe cumulative amount of such foreign exchange rate movements is recognised in the income
\nstatement as part of the gain or loss on sale.
\nForeign exchange rate movements arising on transactions are recognised in the income
\nstatement. Those arising on trading are taken to operating profit; those arising on borrowings are
\nclassified as finance income or cost.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f17895": {
"value": "REVENUE Revenue is measured at the fair value of the consideration received, net of trade discounts
\n(including distributor rebates) and sales taxes. Revenue is discounted only where the impact of
\ndiscounting is material.
\nWhen the Group enters into complex contracts with multiple, separately identifiable components,
\nthe terms of the contract are reviewed to determine whether or not the elements of the contract
\nshould be accounted for separately. If a contract is being split into multiple components, the
\ncontract revenue is allocated to the different components at the start of the contract. The basis of
\nallocation depends on the substance of the contract. The Group considers relative stand-alone
\nselling prices, contractual prices and relative cost when allocating revenue.
\nThe Group has identified the following different types of revenue:
\n(i) Sale of goods recognised at a point in time \u2013 generic products manufactured by Smiths
\nGeneric products are defined as either:
\n\u2013
Products that are not specific to any particular customer;
\n\u2013
Products that may initially be specific to a customer but can be reconfigured at minimal cost,
\ni.e., retaining a margin, for sale to an alternative customer; or
\n\u2013
Products that are specific to a customer but are manufactured at Smiths risk, i.e., we have no
\nright to payment of costs plus margin if the customer refuses to take control of the goods.
\nFor established products with simple installation requirements, revenue is recognised when
\ncontrol of the product is passed to the customer. The point in time that control passes is defined in
\naccordance with the agreed shipping terms and is determined on a case-by-case basis. The time
\nof dispatch or delivery of the goods to the customer is normally the point at which invoicing
\noccurs. However for some generic products, revenue is recognised when the overall
\nperformance obligation has been completed, which is often after the customer has completed its
\nacceptance procedures and has assumed control.
\nProducts that are sold under multiple element arrangements, i.e., contracts involving a
\ncombination of products and services, are bundled into a single performance obligation
\nunless\u00a0the customer can benefit from the goods or services either on their own, or together with
\nother resources that are readily available to the customer and are distinct within the context of
\nthe contract.
\nFor contracts that pass control of the product to the customer only on completion of installation
\nservices, revenue is recognised upon completion of the installation.
\nAn obligation to replace or repair faulty products under the standard warranty terms is
\nrecognised as a provision. If the contract includes terms that either extend the warranty beyond
\nthe standard term or imply that maintenance is provided to keep the product working, these are
\nservice warranties and revenue is deferred to cover the performance obligation in an amount
\nequivalent to the stand-alone selling price of that service.
\n(ii) Sale of goods recognised over time \u2013 customer-specific products where the contractual
\nterms include rights to payment for work performed\u00a0to date
\nCustomer-specific products are defined as being:
\n\u2013
Products that cannot be reconfigured economically such that it remains profitable to sell to
\nanother customer;
\n\u2013
Products that cannot be sold to another customer due to contractual restrictions; and
\n\u2013
Products that allow Smiths to charge for the work performed to date in an amount that
\nrepresents the costs incurred to date plus a margin, should the customer refuse to take control
\nof the goods.
\nFor contracts that meet the terms listed above, revenue is recognised over the period that the
\nGroup is engaged in the manufacture of the product, calculated using the input method based on
\nthe amount of costs incurred to date compared to the overall costs of the contract. This is
\nconsidered to be a faithful depiction of the transfer of the goods to the customer as the costs
\nincurred, total expected costs and total order value are known. The time of dispatch or delivery of
\nthe goods to the customer is normally the point at which invoicing occurs.
\nAn obligation to provide a refund for faulty products under the standard warranty terms is
\nrecognised as a provision. If the contract includes terms that either extend the warranty beyond
\nthe standard term or imply that maintenance is provided to keep the product working, these are
\nservice warranties and revenue is deferred to cover the performance obligation in an amount
\nequivalent to the stand-alone selling price of that service.
\n(iii) Services recognised over time \u2013 services relating to the installation, repair and ongoing
\nmaintenance of equipment
\nServices include installation, commissioning, testing, training, software hosting and
\nmaintenance, product repairs and contracts undertaking extended warranty services.
\n
\n
\n
For complex installations where the supply of services cannot be separated from the supply of
\nproduct, revenue is recognised upon acceptance of the combined performance obligation (see
\nSale of goods (i) above).
\nFor services that can be accounted for as a separate performance obligation, revenue is
\nrecognised over time, assessed on the basis of the actual service provided as a proportion of the
\ntotal services to be provided.
\nDepending on the nature of the contract, revenue is recognised as follows:
\n\u2013
Installation, commissioning and testing services (when neither linked to the supply of product
\nnor subject to acceptance) are recognised rateably as the services are provided;
\n\u2013
Training services are recognised on completion of the training course;
\n\u2013
Software hosting and maintenance services are recognised rateably over the life of the
\ncontract;
\n\u2013
Product repair services, where the product is returned to Smiths premises for remedial action,
\nare recognised when the product is returned to the customer and they regain control of the
\nasset;
\n\u2013
Onsite ad hoc product repair services are recognised rateably as the services are performed;
\n\u2013
Long-term product repair and maintenance contracts are recognised rateably over the
\ncontract term; and
\n\u2013
Extended service warranties are recognised rateably over the contract term.
\nInvoicing for services depends on the nature of the service provided with some services charged
\nin advance and others in arrears.
\nWhere contracts are accounted for under the revenue recognised over time basis, the proportion
\nof costs incurred is used to determine the percentage of contract completion.
\nContracts for the construction of substantial assets, which normally last in excess of one year, are
\naccounted for under the revenue recognised over time basis, using an input method.
\nFor fixed-price contracts, revenue is recognised based upon an assessment of the amount of cost
\nincurred under the contract, compared to the total expected costs that will be incurred under the
\ncontract. This calculation is applied cumulatively with any over/under recognition being adjusted
\nin the current period.
\nFor cost-plus contracts, revenue is recognised based upon costs incurred to date plus any
\nagreed\u00a0margin.
\nFor both fixed-price and cost-plus contracts, invoicing is normally based on a schedule with
\nmilestone payments.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18037": {
"value": "LEASES Lease liabilities are initially measured at the present value of the future lease payments at the
\ncommencement date, discounted by using either the rate implicit in the lease, or if not observable,
\nthe Group\u2019s incremental borrowing rate. Lease payments comprise contractual lease payments;
\nvariable lease payments that depend on an index or rate, initially measured using the index or rate
\nat the commencement date; and the amount expected to be payable under residual value
\nguarantees.
\nRight of use assets are measured at commencement date at the amount of the corresponding
\nlease liability and initial direct costs incurred. Right of use assets are depreciated over the shorter
\nof the lease term and the useful life of the right of use assets, unless there is a transfer of
\nownership or purchase option which is reasonably certain to be exercised at the end of the lease
\nterm, in which case depreciation is charged over the useful life of the underlying asset. Right of
\nuse assets are subject to impairment.
\nWhen a lease contract is modified, either from a change to the duration of the lease or a change to
\namounts payable, the Group remeasures the lease liability by discounting the revised future lease
\npayments at a revised discount rate. A corresponding adjustment is made to the carrying value of
\nthe related right of use asset.
\nLeases of buildings typically have lease terms between one and seven years, while plant and
\nmachinery generally have lease terms between one and three years. The Group also has certain
\nleases of machinery with lease terms of 12 months or less and leases of office equipment with
\nlow value (typically below \u00a35,000). The Group applies the \u2018short-term lease\u2019 and \u2018lease of low-
\nvalue assets\u2019 recognition exemptions for these leases and recognises the lease payments
\nassociated with these leases as an expense on a straight-line basis over the lease term.
\nInterest on lease liabilities is presented as a financing activity in the Consolidated Cash-Flow
\nStatement, included under the heading lease payments.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18065": {
"value": "TAXATION The charge for taxation is based on profits for the year and takes into account taxation deferred
\nbecause of temporary differences between the treatment of certain items for taxation and
\naccounting purposes.
\nCurrent income tax assets and liabilities are measured at the amount expected to be recovered
\nfrom or paid to taxation authorities. Tax benefits are not recognised unless it is likely that the tax
\npositions are sustainable. Tax positions taken are then reviewed to assess whether a provision
\nshould be made based on prevailing circumstances. Tax provisions are included in current tax
\nliabilities. The tax rates and tax laws used to compute the amount are those that are enacted or
\nsubstantively enacted, at the reporting date in the countries where the Group operates and
\ngenerates taxable income.
\nThe Group operates and is subject to taxation in many countries. Tax legislation is different in each
\ncountry, is often complex and is subject to interpretation by management and government
\nauthorities. These matters of judgement give rise to the need to create provisions for uncertain
\ntax positions which are recognised when it is considered more likely than not that there will be a
\nfuture outflow of funds to a taxing authority. Provisions are made against individual exposures
\n
\n
\n
and take into account the specific circumstances of each case, including the strength of technical
\narguments, recent case law decisions or rulings on similar issues and relevant external advice.
\nThe amounts are measured using one of the following methods, depending on which of the
\nmethods the Directors expect will better reflect the amount the Group will pay to the tax authority:
\n\u2013
The single best estimate method is used where there is a single outcome that is more likely
\nthan not to occur. This will happen, for example, where the tax outcome is binary or the range of
\npossible outcomes is very limited; or
\n\u2013
Alternatively, a probability weighted expected value is used where, on the balance of
\nprobabilities, there will be a payment to the tax authority but there are a number of possible
\noutcomes. In this case, a probability is assigned to each of the outcomes and the amount
\nprovided is the sum of these risk-weighted amounts. In assessing provisions against uncertain
\ntax positions, management uses in-house tax experts, professional firms and previous
\nexperience of the taxing authority to evaluate the risk.
\nDeferred tax is provided in full using the balance sheet liability method. A deferred tax asset is
\nrecognised where it is probable that future taxable income will be sufficient to utilise the available
\nrelief. Tax is charged or credited to the income statement except when it relates to items charged
\nor credited directly to equity, in which case the tax is also dealt with in equity.
\nDeferred tax is provided on temporary differences arising on investments in subsidiaries and
\nassociates, except where the timing of the reversal of the temporary differences is controlled by
\nthe Company and it is probable that the temporary difference will not reverse in the foreseeable
\nfuture. Deferred tax liabilities and assets are not discounted.
\nIAS 12\u00a0International Tax Reform: Pillar Two Model Rules.
\nOn 19th July 2023, the UK Endorsement Board adopted the Amendments to IAS 12\u00a0International
\nTax Reform: Pillar Two Model Rules, issued by the IASB in May 2023. The Amendments introduce
\na temporary mandatory exception from accounting for deferred taxes arising from the Pillar Two
\nmodel rules and the Group has applied this exception to recognising and disclosing information
\nabout deferred tax assets and liabilities related to Pillar Two income taxes.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18066": {
"value": "TAXATION The charge for taxation is based on profits for the year and takes into account taxation deferred
\nbecause of temporary differences between the treatment of certain items for taxation and
\naccounting purposes.
\nCurrent income tax assets and liabilities are measured at the amount expected to be recovered
\nfrom or paid to taxation authorities. Tax benefits are not recognised unless it is likely that the tax
\npositions are sustainable. Tax positions taken are then reviewed to assess whether a provision
\nshould be made based on prevailing circumstances. Tax provisions are included in current tax
\nliabilities. The tax rates and tax laws used to compute the amount are those that are enacted or
\nsubstantively enacted, at the reporting date in the countries where the Group operates and
\ngenerates taxable income.
\nThe Group operates and is subject to taxation in many countries. Tax legislation is different in each
\ncountry, is often complex and is subject to interpretation by management and government
\nauthorities. These matters of judgement give rise to the need to create provisions for uncertain
\ntax positions which are recognised when it is considered more likely than not that there will be a
\nfuture outflow of funds to a taxing authority. Provisions are made against individual exposures
\n
\n
\n
and take into account the specific circumstances of each case, including the strength of technical
\narguments, recent case law decisions or rulings on similar issues and relevant external advice.
\nThe amounts are measured using one of the following methods, depending on which of the
\nmethods the Directors expect will better reflect the amount the Group will pay to the tax authority:
\n\u2013
The single best estimate method is used where there is a single outcome that is more likely
\nthan not to occur. This will happen, for example, where the tax outcome is binary or the range of
\npossible outcomes is very limited; or
\n\u2013
Alternatively, a probability weighted expected value is used where, on the balance of
\nprobabilities, there will be a payment to the tax authority but there are a number of possible
\noutcomes. In this case, a probability is assigned to each of the outcomes and the amount
\nprovided is the sum of these risk-weighted amounts. In assessing provisions against uncertain
\ntax positions, management uses in-house tax experts, professional firms and previous
\nexperience of the taxing authority to evaluate the risk.
\nDeferred tax is provided in full using the balance sheet liability method. A deferred tax asset is
\nrecognised where it is probable that future taxable income will be sufficient to utilise the available
\nrelief. Tax is charged or credited to the income statement except when it relates to items charged
\nor credited directly to equity, in which case the tax is also dealt with in equity.
\nDeferred tax is provided on temporary differences arising on investments in subsidiaries and
\nassociates, except where the timing of the reversal of the temporary differences is controlled by
\nthe Company and it is probable that the temporary difference will not reverse in the foreseeable
\nfuture. Deferred tax liabilities and assets are not discounted.
\nIAS 12\u00a0International Tax Reform: Pillar Two Model Rules.
\nOn 19th July 2023, the UK Endorsement Board adopted the Amendments to IAS 12\u00a0International
\nTax Reform: Pillar Two Model Rules, issued by the IASB in May 2023. The Amendments introduce
\na temporary mandatory exception from accounting for deferred taxes arising from the Pillar Two
\nmodel rules and the Group has applied this exception to recognising and disclosing information
\nabout deferred tax assets and liabilities related to Pillar Two income taxes.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18131": {
"value": "Deferred tax is provided in full using the balance sheet liability method. A deferred tax asset is recognised where it is probable that future taxable income will be sufficient to utilise the available
\nrelief. Tax is charged or credited to the income statement except when it relates to items charged
\nor credited directly to equity, in which case the tax is also dealt with in equity.
\nDeferred tax is provided on temporary differences arising on investments in subsidiaries and
\nassociates, except where the timing of the reversal of the temporary differences is controlled by
\nthe Company and it is probable that the temporary difference will not reverse in the foreseeable
\nfuture. Deferred tax liabilities and assets are not discounted.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18143": {
"value": "On 19th July 2023, the UK Endorsement Board adopted the Amendments to IAS 12\u00a0International Tax Reform: Pillar Two Model Rules, issued by the IASB in May 2023. The Amendments introduce
\na temporary mandatory exception from accounting for deferred taxes arising from the Pillar Two
\nmodel rules and the Group has applied this exception to recognising and disclosing information
about deferred tax assets and liabilities related to Pillar Two income taxes.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFirstTimeAdoptionExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18153": {
"value": "EMPLOYEE BENEFITS Share-based compensation
\nThe fair value of the shares or share options granted is recognised as an expense over the vesting
\nperiod to reflect the value of the employee services received. The fair value of options granted,
\nexcluding the impact of any non-market vesting conditions, is calculated using established option
\npricing models, principally binomial models. The probability of meeting non-market vesting
\nconditions, which include profitability targets, is used to estimate the number of share options
\nwhich are likely to vest.
\nFor cash-settled share-based payment, a liability is recognised based on the fair value of the
\npayment earned by the balance sheet date. For equity-settled share-based payment, the
\ncorresponding credit is recognised directly in reserves.
\nPension obligations and post-retirement benefits
\nPensions and similar benefits (principally healthcare) are accounted for under IAS 19. The
\nretirement benefit obligation in respect of the defined benefit plans is the liability (the present
\nvalue of all expected future obligations) less the fair value of the plan assets.
\nThe income statement expense is allocated between current service costs, reflecting the
\nincrease in liability due to any benefit accrued by employees in the current period, any past
\nservice costs/credits and settlement losses or gains which are recognised immediately, and the
\nscheme administration costs.
\nActuarial gains and losses are recognised in the statement of comprehensive income in the year
\nin which they arise. These comprise the impact on the liabilities of changes in demographic and
\nfinancial assumptions compared with the start of the year, actual experience being different to
\nassumptions and the return on plan assets being above or below the amount included in the net
\npension interest cost.
\nPayments to defined contribution schemes are charged as an income statement expense as they
\nfall due.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18156": {
"value": "Share-based compensation The fair value of the shares or share options granted is recognised as an expense over the vesting
\nperiod to reflect the value of the employee services received. The fair value of options granted,
\nexcluding the impact of any non-market vesting conditions, is calculated using established option
\npricing models, principally binomial models. The probability of meeting non-market vesting
\nconditions, which include profitability targets, is used to estimate the number of share options
\nwhich are likely to vest.
\nFor cash-settled share-based payment, a liability is recognised based on the fair value of the
\npayment earned by the balance sheet date. For equity-settled share-based payment, the
\ncorresponding credit is recognised directly in reserves.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18169": {
"value": "Pension obligations and post-retirement benefits Pensions and similar benefits (principally healthcare) are accounted for under IAS 19. The
\nretirement benefit obligation in respect of the defined benefit plans is the liability (the present
\nvalue of all expected future obligations) less the fair value of the plan assets.
\nThe income statement expense is allocated between current service costs, reflecting the
\nincrease in liability due to any benefit accrued by employees in the current period, any past
\nservice costs/credits and settlement losses or gains which are recognised immediately, and the
\nscheme administration costs.
\nActuarial gains and losses are recognised in the statement of comprehensive income in the year
\nin which they arise. These comprise the impact on the liabilities of changes in demographic and
\nfinancial assumptions compared with the start of the year, actual experience being different to
\nassumptions and the return on plan assets being above or below the amount included in the net
\npension interest cost.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18185": {
"value": "Payments to defined contribution schemes are charged as an income statement expense as they fall due.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDefinedContributionPlansExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18190": {
"value": "INTANGIBLE ASSETS Goodwill
\nGoodwill represents the excess of the cost of an acquisition over the fair value of the Group\u2019s
\nshare of the identifiable net assets of the acquired subsidiary at the date of acquisition.
\nThe goodwill arising from acquisitions of subsidiaries after 1 August 1998 is included in intangible
\nassets, tested annually for impairment and carried at cost less accumulated impairment losses.
\nGains and losses on the disposal of an entity include the carrying amount of goodwill relating to
\nthe entity sold. The goodwill arising from acquisitions of subsidiaries before 1 August 1998 was
\nset against reserves in the year of acquisition.
\nGoodwill is tested for impairment at least annually. Should the test indicate that the net realisable
\nvalue of the CGU is less than current carrying value, an impairment loss will be recognised
\nimmediately in the income statement. Subsequent reversals of impairment losses for goodwill
\nare not recognised.
\nResearch and development
\nExpenditure on research and development is charged to the income statement in the year in
\nwhich it is incurred with the exception of:
\n\u2013
Amounts recoverable from third parties; and
\n\u2013
Expenditure incurred in respect of the development of major new products where the outcome
\nof those projects is assessed as being reasonably certain as regards viability and technical
\nfeasibility. Such expenditure is capitalised and amortised over the estimated period of sale
\nfor each product, commencing in the year that the product is ready for sale. Amortisation is
\ncharged straight line\u00a0or based on the units produced, depending on the nature of the product
\nand the availability of reliable estimates of\u00a0production\u00a0volumes.
\n
\n
\n
The cost of development projects which are expected to take a substantial period of time to
\ncomplete includes attributable borrowing\u00a0costs.
\nIntangible assets acquired in business combinations
\nThe identifiable net assets acquired as a result of a business combination may include intangible
\nassets other than goodwill. Any such intangible assets are amortised straight line over their
\nexpected useful lives as follows:
\nPatents, licences and trademarks
up to 20 years
\nTechnology
up to 13 years
\nCustomer relationships
up to 15 years
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
\nSoftware, patents and intellectual property
\nThe estimated useful lives are as follows:
\nSoftware
up to seven years
\nPatents and intellectual property
\nshorter of the economic life and the period the right is
\nlegally enforceable
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18193": {
"value": "Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group\u2019s
\nshare of the identifiable net assets of the acquired subsidiary at the date of acquisition.
\nThe goodwill arising from acquisitions of subsidiaries after 1 August 1998 is included in intangible
\nassets, tested annually for impairment and carried at cost less accumulated impairment losses.
\nGains and losses on the disposal of an entity include the carrying amount of goodwill relating to
\nthe entity sold. The goodwill arising from acquisitions of subsidiaries before 1 August 1998 was
\nset against reserves in the year of acquisition.
\nGoodwill is tested for impairment at least annually. Should the test indicate that the net realisable
\nvalue of the CGU is less than current carrying value, an impairment loss will be recognised
\nimmediately in the income statement. Subsequent reversals of impairment losses for goodwill
\nare not recognised.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18208": {
"value": "Research and development Expenditure on research and development is charged to the income statement in the year in
\nwhich it is incurred with the exception of:
\n\u2013
Amounts recoverable from third parties; and
\n\u2013
Expenditure incurred in respect of the development of major new products where the outcome
\nof those projects is assessed as being reasonably certain as regards viability and technical
\nfeasibility. Such expenditure is capitalised and amortised over the estimated period of sale
\nfor each product, commencing in the year that the product is ready for sale. Amortisation is
\ncharged straight line\u00a0or based on the units produced, depending on the nature of the product
\nand the availability of reliable estimates of\u00a0production\u00a0volumes.
\n
\n
\n
The cost of development projects which are expected to take a substantial period of time to
\ncomplete includes attributable borrowing\u00a0costs.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18256": {
"value": "Intangible assets acquired in business combinations The identifiable net assets acquired as a result of a business combination may include intangible
\nassets other than goodwill. Any such intangible assets are amortised straight line over their
\nexpected useful lives as follows:
\nPatents, licences and trademarks
up to 20 years
\nTechnology
up to 13 years
\nCustomer relationships
up to 15 years
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
\nSoftware, patents and intellectual property
\nThe estimated useful lives are as follows:
\nSoftware
up to seven years
\nPatents and intellectual property
\nshorter of the economic life and the period the right is
\nlegally enforceable
The assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18257": {
"value": "Intangible assets acquired in business combinations The identifiable net assets acquired as a result of a business combination may include intangible
\nassets other than goodwill. Any such intangible assets are amortised straight line over their
\nexpected useful lives as follows:
\nPatents, licences and trademarks
up to 20 years
\nTechnology
up to 13 years
\nCustomer relationships
up to 15 years
\nThe assets\u2019 useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18282": {
"value": "PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at historical cost less accumulated depreciation and
\nany recognised impairment losses.
\nLand is not depreciated. Depreciation is provided on other assets estimated to write off the
\ndepreciable amount of relevant assets by equal annual instalments over their estimated useful
\nlives. In general, the rates used are:
\nFreehold and long leasehold buildings
2% per annum
\nShort leasehold property
over the period of the lease
\nPlant, machinery, etc.
10% to 20% per annum
\nFixtures, fittings, tools and other equipment
10% to\u00a033% per annum
\nThe cost of any assets which are expected to take a substantial period of time to complete
\nincludes attributable borrowing costs.
\nThe assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at each
\nbalance sheet date. An asset\u2019s carrying amount is written down immediately to its recoverable
\namount if the asset\u2019s carrying amount is greater than its estimated recoverable\u00a0amount.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18287": {
"value": "Land is not depreciated. Depreciation is provided on other assets estimated to write off the depreciable amount of relevant assets by equal annual instalments over their estimated useful
\nlives. In general, the rates used are:
\nFreehold and long leasehold buildings
2% per annum
\nShort leasehold property
over the period of the lease
\nPlant, machinery, etc.
10% to 20% per annum
\nFixtures, fittings, tools and other equipment
10% to\u00a033% per annum",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18307": {
"value": "INVENTORIES Inventories are stated at the lower of cost and net realisable value. Cost is determined using the
\nfirst-in, first-out method. The cost of finished goods and work in progress comprises raw
\nmaterials, direct labour, other direct costs and related production overheads (based on normal
\noperating capacity). The cost of items of inventory which take a substantial period of time to
\ncomplete includes attributable borrowing costs.
\nThe net realisable value of inventories is the estimated selling price in the ordinary course of
\nbusiness, less applicable variable selling expenses. Provisions are made for any slow-moving,
\nobsolete or defective inventories.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18319": {
"value": "TRADE AND OTHER RECEIVABLES Trade receivables and contract assets are either classified as \u2018held to collect\u2019 and initially
\nrecognised at fair value and subsequently measured at amortised cost, less any appropriate
\nprovision for expected credit losses or as \u2018held to collect and sell\u2019 and measured at fair value
\nthrough other comprehensive income (FVOCI).
\nA provision for expected credit losses is established when there is objective evidence that it will
\nnot be possible to collect all amounts due according to the original payment terms. Expected
\ncredit losses are determined using historical write-offs as a basis, adjusted for factors that are
\nspecific to the debtor, general economic conditions of the industry in which the debtor operates
\nand with a default risk multiplier applied to reflect country risk premium. The Group applies the
\nIFRS 9 simplified lifetime expected credit loss approach for trade receivables and contract assets
\nwhich do not contain a significant financing component",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18334": {
"value": "PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a
\nresult of a past event, it is probable that an outflow of resources embodying economic benefits
\nwill be required to settle the obligation, and a reliable estimate can be made of the amount of the
\nobligation. Where the Group expects some or all of a provision to be reimbursed, for example
\nunder an insurance contract, the reimbursement is recognised as a separate asset but only when
\nthe reimbursement is virtually certain.
\nProvisions for warranties and product liability, disposal indemnities, restructuring costs, property
\ndilapidations and legal claims are recognised when: the Company has a legal or constructive
\nobligation as a result of a past event; it is probable that an outflow of resources will be required to
\nsettle the obligation; and the amount has been reliably estimated. Provisions are not recognised
\nfor future operating losses.
\nProvisions are discounted where the time value of money is material.
\nWhere there is a number of similar obligations, for example where a warranty has been given, the
\nlikelihood that an outflow will be required in settlement is determined by considering the class of
\nobligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
\nto any one item included in the same class of obligations may be small.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18354": {
"value": "DISCONTINUED OPERATIONS A discontinued operation is either:
\n\u2013
A component of the Group\u2019s business that represents a separate major line of business or
\ngeographical area of operations that has been disposed of, has been abandoned or meets the
\ncriteria to be classified as held for sale; or
\n\u2013
A business acquired solely for the purpose of selling it.
\n
\n
\n
Discontinued operations are presented on the income statement as\u00a0a\u00a0separate line and are
\nshown net of tax.
\nIn accordance with IAS 21, gains and losses on intra-group monetary assets and liabilities are not
\neliminated. Therefore foreign exchange rate movements on intercompany loans with discontinued
\noperations are presented on the income statement as non-headline finance cost items.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDiscontinuedOperationsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18399": {
"value": "CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing
\nsecurities with maturities of three months or less.
\nIn the cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which
\nare included as current borrowings in liabilities on the balance sheet.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18407": {
"value": "FINANCIAL ASSETS The classification of financial assets depends on the purpose for which the assets were acquired.
\nManagement determines the classification of an asset at initial recognition and re-evaluates the
\ndesignation at each reporting date. Financial assets are classified as: measured at amortised
\ncost, fair value through other comprehensive income or fair value through profit and loss.
\nFinancial assets primarily include trade receivables, cash and cash equivalents (comprising cash
\nat bank, money-market funds, and short-term deposits), short-term investments, derivatives
\n(foreign exchange contracts and interest rate derivatives) and unlisted investments.
\n\u2013
Trade receivables are classified either as \u2018held to collect\u2019 and measured at amortised cost or
\nas \u2018held to collect and sell\u2019 and measured at fair value through other comprehensive income
\n(FVOCI). The Group may sell trade receivables due from certain customers before the due date.
\nAny trade receivables from such customers that are not sold at the reporting date are classified
\nas \u2018held to collect and sell\u2019.
\n\u2013
Cash and cash equivalents (consisting of balances with banks and other financial institutions,
\nmoney-market funds and short-term deposits) and short-term investments are subject to low
\nmarket risk. Cash balances, short-term deposits and short-term investments are measured at
\namortised cost. Money market funds are measured at fair value through profit and loss (FVPL).
\n\u2013
Derivatives are measured at FVPL.
\n\u2013
Listed and unlisted investments are measured at FVOCI.
\n\u2013
Deferred contingent consideration are measured at FVPL.
\nFinancial assets are derecognised when the right to receive cash-flows from the assets has
\nexpired, or has been transferred, and the Group has transferred substantially all of the risks and
\nrewards of ownership.
\nOn initial recognition, the Group may make an irrevocable election to designate certain
\ninvestments as FVOCI, if they are not held for trading or relate to contingent consideration on a
\nbusiness combination. When securities measured at FVOCI are sold or impaired, the
\naccumulated fair value adjustments remain in reserves.
\nFinancial assets are classified as current if they are expected to be realised within 12 months of
\nthe balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18408": {
"value": "FINANCIAL ASSETS The classification of financial assets depends on the purpose for which the assets were acquired.
\nManagement determines the classification of an asset at initial recognition and re-evaluates the
\ndesignation at each reporting date. Financial assets are classified as: measured at amortised
\ncost, fair value through other comprehensive income or fair value through profit and loss.
\nFinancial assets primarily include trade receivables, cash and cash equivalents (comprising cash
\nat bank, money-market funds, and short-term deposits), short-term investments, derivatives
\n(foreign exchange contracts and interest rate derivatives) and unlisted investments.
\n\u2013
Trade receivables are classified either as \u2018held to collect\u2019 and measured at amortised cost or
\nas \u2018held to collect and sell\u2019 and measured at fair value through other comprehensive income
\n(FVOCI). The Group may sell trade receivables due from certain customers before the due date.
\nAny trade receivables from such customers that are not sold at the reporting date are classified
\nas \u2018held to collect and sell\u2019.
\n\u2013
Cash and cash equivalents (consisting of balances with banks and other financial institutions,
\nmoney-market funds and short-term deposits) and short-term investments are subject to low
\nmarket risk. Cash balances, short-term deposits and short-term investments are measured at
\namortised cost. Money market funds are measured at fair value through profit and loss (FVPL).
\n\u2013
Derivatives are measured at FVPL.
\n\u2013
Listed and unlisted investments are measured at FVOCI.
\n\u2013
Deferred contingent consideration are measured at FVPL.
\nFinancial assets are derecognised when the right to receive cash-flows from the assets has
\nexpired, or has been transferred, and the Group has transferred substantially all of the risks and
\nrewards of ownership.
\nOn initial recognition, the Group may make an irrevocable election to designate certain
\ninvestments as FVOCI, if they are not held for trading or relate to contingent consideration on a
\nbusiness combination. When securities measured at FVOCI are sold or impaired, the
\naccumulated fair value adjustments remain in reserves.
\nFinancial assets are classified as current if they are expected to be realised within 12 months of
\nthe balance sheet date.
\nFINANCIAL LIABILITIES
\nBorrowings are initially recognised at the fair value of the proceeds, net of related transaction
\ncosts. These transaction costs, and any discount or premium on issue, are subsequently
\namortised under the effective interest rate method through the income statement as interest over
\nthe life of the loan and added to the liability disclosed in the balance sheet. Related accrued
\ninterest is included in the borrowings figure.
\nBorrowings are classified as current liabilities unless the Group has an unconditional right to
\ndefer settlement of the liability for at least one year after the balance sheet date.
\nDERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
\nThe Group uses derivative financial instruments to hedge its exposures to foreign exchange and
\ninterest rates arising from its operating and financing activities.
\nDerivative financial instruments are initially recognised at fair value on the date a derivative
\ncontract is entered into and are subsequently re-measured at their fair value. The method of
\nrecognising any resulting gain or loss depends on whether the derivative financial instrument is
\ndesignated as a hedging instrument and, if so, the nature of the item being hedged.
\nWhere derivative financial instruments are designated into hedging relationships, the Group
\nformally documents the following:
\n\u2013
The risk management objective and strategy for entering the hedge;
\n\u2013
The nature of the risks being hedged and the economic relationship between the hedged item
\nand the hedging instrument; and
\n\u2013
Whether the change in cash-flows of the hedged item and hedging instrument are expected to
\noffset each other.
\nChanges in the fair value of any derivative financial instruments that do not qualify for hedge
\naccounting are recognised immediately in the income statement.
\nFair value hedge
\nThe Group uses derivative financial instruments to convert part of its fixed rate debt to floating
\nrate in order to hedge the risks arising from its external borrowings.
\nThe Group designates these as fair value hedges of interest rate risk. Changes in the hedging
\ninstrument are recorded in the income statement, together with any changes in the fair values of
\nthe hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge
\nis effective. Gains or losses relating to any ineffectiveness are immediately recognised in the
\nincome statement.
\n
\n
\n
Cash-flow hedge
\nCash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
\nThe effective portions of changes in the fair values of derivatives that are designated and qualify as
\ncash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. Amounts accumulated in the hedge reserve are
\nrecycled in the income statement in the periods when the hedged items will affect profit or loss (for
\nexample, when the forecast sale that is hedged takes place).
\nIf a forecast transaction that is hedged results in the recognition of a non-financial asset (for
\nexample, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are
\ntransferred from the reserve and included in the initial measurement of the cost of the asset or
\nliability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
\nfor hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains
\nin the reserve and is recognised when the forecast transaction is ultimately recognised in the
\nincome statement.
\nWhen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
\nreported in other comprehensive income is immediately transferred to the income statement.
\nNet investment hedge
\nHedges of net investments in foreign operations are accounted for similarly to cash-flow hedges.
\nAny gain or loss on the hedging instrument relating to the effective portion of the hedge is
\nrecognised in other comprehensive income; the gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. When a foreign operation is disposed of, gains
\nand losses accumulated in equity related to that operation are included in the income statement
\nfor that period.
\nFAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
\nThe fair values of financial assets and financial liabilities are the amounts at which the instrument
\ncould be exchanged in a current transaction between willing parties, other than in a forced or
\nliquidation sale.
\nIFRS 13: \u2018Fair value measurement\u2019 requires fair value measurements to be classified according to
\nthe following hierarchy:
\n\u2013
Level 1 \u2013 quoted prices in active markets for identical assets or liabilities;
\n\u2013
Level 2 \u2013 valuations in which all inputs are observable either directly (i.e., as prices) or indirectly
\n(i.e., derived from prices); and
\n\u2013
Level 3 \u2013 valuations in which one or more inputs that are significant to the resulting value are
\nnot based on observable market data.
\nSee note 21 for information on the methods which the Group uses to estimate the fair values of its
\nfinancial instruments.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18409": {
"value": "FINANCIAL ASSETS The classification of financial assets depends on the purpose for which the assets were acquired.
\nManagement determines the classification of an asset at initial recognition and re-evaluates the
\ndesignation at each reporting date. Financial assets are classified as: measured at amortised
\ncost, fair value through other comprehensive income or fair value through profit and loss.
\nFinancial assets primarily include trade receivables, cash and cash equivalents (comprising cash
\nat bank, money-market funds, and short-term deposits), short-term investments, derivatives
\n(foreign exchange contracts and interest rate derivatives) and unlisted investments.
\n\u2013
Trade receivables are classified either as \u2018held to collect\u2019 and measured at amortised cost or
\nas \u2018held to collect and sell\u2019 and measured at fair value through other comprehensive income
\n(FVOCI). The Group may sell trade receivables due from certain customers before the due date.
\nAny trade receivables from such customers that are not sold at the reporting date are classified
\nas \u2018held to collect and sell\u2019.
\n\u2013
Cash and cash equivalents (consisting of balances with banks and other financial institutions,
\nmoney-market funds and short-term deposits) and short-term investments are subject to low
\nmarket risk. Cash balances, short-term deposits and short-term investments are measured at
\namortised cost. Money market funds are measured at fair value through profit and loss (FVPL).
\n\u2013
Derivatives are measured at FVPL.
\n\u2013
Listed and unlisted investments are measured at FVOCI.
\n\u2013
Deferred contingent consideration are measured at FVPL.
\nFinancial assets are derecognised when the right to receive cash-flows from the assets has
\nexpired, or has been transferred, and the Group has transferred substantially all of the risks and
\nrewards of ownership.
\nOn initial recognition, the Group may make an irrevocable election to designate certain
\ninvestments as FVOCI, if they are not held for trading or relate to contingent consideration on a
\nbusiness combination. When securities measured at FVOCI are sold or impaired, the
\naccumulated fair value adjustments remain in reserves.
\nFinancial assets are classified as current if they are expected to be realised within 12 months of
\nthe balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForAvailableforsaleFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18438": {
"value": "Financial assets are derecognised when the right to receive cash-flows from the assets has expired, or has been transferred, and the Group has transferred substantially all of the risks and
\nrewards of ownership.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18452": {
"value": "FINANCIAL LIABILITIES Borrowings are initially recognised at the fair value of the proceeds, net of related transaction
\ncosts. These transaction costs, and any discount or premium on issue, are subsequently
\namortised under the effective interest rate method through the income statement as interest over
\nthe life of the loan and added to the liability disclosed in the balance sheet. Related accrued
\ninterest is included in the borrowings figure.
\nBorrowings are classified as current liabilities unless the Group has an unconditional right to
\ndefer settlement of the liability for at least one year after the balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18453": {
"value": "FINANCIAL LIABILITIES Borrowings are initially recognised at the fair value of the proceeds, net of related transaction
\ncosts. These transaction costs, and any discount or premium on issue, are subsequently
\namortised under the effective interest rate method through the income statement as interest over
\nthe life of the loan and added to the liability disclosed in the balance sheet. Related accrued
\ninterest is included in the borrowings figure.
\nBorrowings are classified as current liabilities unless the Group has an unconditional right to
\ndefer settlement of the liability for at least one year after the balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18457": {
"value": "Borrowings are initially recognised at the fair value of the proceeds, net of related transaction costs. These transaction costs, and any discount or premium on issue, are subsequently
\namortised under the effective interest rate method through the income statement as interest over
\nthe life of the loan and added to the liability disclosed in the balance sheet. Related accrued
\ninterest is included in the borrowings figure.
\nBorrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least one year after the balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18458": {
"value": "Borrowings are initially recognised at the fair value of the proceeds, net of related transaction costs. These transaction costs, and any discount or premium on issue, are subsequently
\namortised under the effective interest rate method through the income statement as interest over
\nthe life of the loan and added to the liability disclosed in the balance sheet. Related accrued
\ninterest is included in the borrowings figure.
\nBorrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least one year after the balance sheet date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingCostsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18472": {
"value": "DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Group uses derivative financial instruments to hedge its exposures to foreign exchange and
\ninterest rates arising from its operating and financing activities.
\nDerivative financial instruments are initially recognised at fair value on the date a derivative
\ncontract is entered into and are subsequently re-measured at their fair value. The method of
\nrecognising any resulting gain or loss depends on whether the derivative financial instrument is
\ndesignated as a hedging instrument and, if so, the nature of the item being hedged.
\nWhere derivative financial instruments are designated into hedging relationships, the Group
\nformally documents the following:
\n\u2013
The risk management objective and strategy for entering the hedge;
\n\u2013
The nature of the risks being hedged and the economic relationship between the hedged item
\nand the hedging instrument; and
\n\u2013
Whether the change in cash-flows of the hedged item and hedging instrument are expected to
\noffset each other.
\nChanges in the fair value of any derivative financial instruments that do not qualify for hedge
\naccounting are recognised immediately in the income statement.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18473": {
"value": "DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Group uses derivative financial instruments to hedge its exposures to foreign exchange and
\ninterest rates arising from its operating and financing activities.
\nDerivative financial instruments are initially recognised at fair value on the date a derivative
\ncontract is entered into and are subsequently re-measured at their fair value. The method of
\nrecognising any resulting gain or loss depends on whether the derivative financial instrument is
\ndesignated as a hedging instrument and, if so, the nature of the item being hedged.
\nWhere derivative financial instruments are designated into hedging relationships, the Group
\nformally documents the following:
\n\u2013
The risk management objective and strategy for entering the hedge;
\n\u2013
The nature of the risks being hedged and the economic relationship between the hedged item
\nand the hedging instrument; and
\n\u2013
Whether the change in cash-flows of the hedged item and hedging instrument are expected to
\noffset each other.
\nChanges in the fair value of any derivative financial instruments that do not qualify for hedge
\naccounting are recognised immediately in the income statement.
\nFair value hedge
\nThe Group uses derivative financial instruments to convert part of its fixed rate debt to floating
\nrate in order to hedge the risks arising from its external borrowings.
\nThe Group designates these as fair value hedges of interest rate risk. Changes in the hedging
\ninstrument are recorded in the income statement, together with any changes in the fair values of
\nthe hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge
\nis effective. Gains or losses relating to any ineffectiveness are immediately recognised in the
\nincome statement.
\n
\n
\n
Cash-flow hedge
\nCash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
\nThe effective portions of changes in the fair values of derivatives that are designated and qualify as
\ncash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. Amounts accumulated in the hedge reserve are
\nrecycled in the income statement in the periods when the hedged items will affect profit or loss (for
\nexample, when the forecast sale that is hedged takes place).
\nIf a forecast transaction that is hedged results in the recognition of a non-financial asset (for
\nexample, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are
\ntransferred from the reserve and included in the initial measurement of the cost of the asset or
\nliability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
\nfor hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains
\nin the reserve and is recognised when the forecast transaction is ultimately recognised in the
\nincome statement.
\nWhen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
\nreported in other comprehensive income is immediately transferred to the income statement.
\nNet investment hedge
\nHedges of net investments in foreign operations are accounted for similarly to cash-flow hedges.
\nAny gain or loss on the hedging instrument relating to the effective portion of the hedge is
\nrecognised in other comprehensive income; the gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. When a foreign operation is disposed of, gains
\nand losses accumulated in equity related to that operation are included in the income statement
\nfor that period.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18474": {
"value": "DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Group uses derivative financial instruments to hedge its exposures to foreign exchange and
\ninterest rates arising from its operating and financing activities.
\nDerivative financial instruments are initially recognised at fair value on the date a derivative
\ncontract is entered into and are subsequently re-measured at their fair value. The method of
\nrecognising any resulting gain or loss depends on whether the derivative financial instrument is
\ndesignated as a hedging instrument and, if so, the nature of the item being hedged.
\nWhere derivative financial instruments are designated into hedging relationships, the Group
\nformally documents the following:
\n\u2013
The risk management objective and strategy for entering the hedge;
\n\u2013
The nature of the risks being hedged and the economic relationship between the hedged item
\nand the hedging instrument; and
\n\u2013
Whether the change in cash-flows of the hedged item and hedging instrument are expected to
\noffset each other.
\nChanges in the fair value of any derivative financial instruments that do not qualify for hedge
\naccounting are recognised immediately in the income statement.
\nFair value hedge
\nThe Group uses derivative financial instruments to convert part of its fixed rate debt to floating
\nrate in order to hedge the risks arising from its external borrowings.
\nThe Group designates these as fair value hedges of interest rate risk. Changes in the hedging
\ninstrument are recorded in the income statement, together with any changes in the fair values of
\nthe hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge
\nis effective. Gains or losses relating to any ineffectiveness are immediately recognised in the
\nincome statement.
\n
\n
\n
Cash-flow hedge
\nCash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
\nThe effective portions of changes in the fair values of derivatives that are designated and qualify as
\ncash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. Amounts accumulated in the hedge reserve are
\nrecycled in the income statement in the periods when the hedged items will affect profit or loss (for
\nexample, when the forecast sale that is hedged takes place).
\nIf a forecast transaction that is hedged results in the recognition of a non-financial asset (for
\nexample, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are
\ntransferred from the reserve and included in the initial measurement of the cost of the asset or
\nliability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
\nfor hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains
\nin the reserve and is recognised when the forecast transaction is ultimately recognised in the
\nincome statement.
\nWhen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
\nreported in other comprehensive income is immediately transferred to the income statement.
\nNet investment hedge
\nHedges of net investments in foreign operations are accounted for similarly to cash-flow hedges.
\nAny gain or loss on the hedging instrument relating to the effective portion of the hedge is
\nrecognised in other comprehensive income; the gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. When a foreign operation is disposed of, gains
\nand losses accumulated in equity related to that operation are included in the income statement
\nfor that period.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18475": {
"value": "DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Group uses derivative financial instruments to hedge its exposures to foreign exchange and
\ninterest rates arising from its operating and financing activities.
\nDerivative financial instruments are initially recognised at fair value on the date a derivative
\ncontract is entered into and are subsequently re-measured at their fair value. The method of
\nrecognising any resulting gain or loss depends on whether the derivative financial instrument is
\ndesignated as a hedging instrument and, if so, the nature of the item being hedged.
\nWhere derivative financial instruments are designated into hedging relationships, the Group
\nformally documents the following:
\n\u2013
The risk management objective and strategy for entering the hedge;
\n\u2013
The nature of the risks being hedged and the economic relationship between the hedged item
\nand the hedging instrument; and
\n\u2013
Whether the change in cash-flows of the hedged item and hedging instrument are expected to
\noffset each other.
\nChanges in the fair value of any derivative financial instruments that do not qualify for hedge
\naccounting are recognised immediately in the income statement.
\nFair value hedge
\nThe Group uses derivative financial instruments to convert part of its fixed rate debt to floating
\nrate in order to hedge the risks arising from its external borrowings.
\nThe Group designates these as fair value hedges of interest rate risk. Changes in the hedging
\ninstrument are recorded in the income statement, together with any changes in the fair values of
\nthe hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge
\nis effective. Gains or losses relating to any ineffectiveness are immediately recognised in the
\nincome statement.
\n
\n
\n
Cash-flow hedge
\nCash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
\nThe effective portions of changes in the fair values of derivatives that are designated and qualify as
\ncash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. Amounts accumulated in the hedge reserve are
\nrecycled in the income statement in the periods when the hedged items will affect profit or loss (for
\nexample, when the forecast sale that is hedged takes place).
\nIf a forecast transaction that is hedged results in the recognition of a non-financial asset (for
\nexample, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are
\ntransferred from the reserve and included in the initial measurement of the cost of the asset or
\nliability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
\nfor hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains
\nin the reserve and is recognised when the forecast transaction is ultimately recognised in the
\nincome statement.
\nWhen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
\nreported in other comprehensive income is immediately transferred to the income statement.
\nNet investment hedge
\nHedges of net investments in foreign operations are accounted for similarly to cash-flow hedges.
\nAny gain or loss on the hedging instrument relating to the effective portion of the hedge is
\nrecognised in other comprehensive income; the gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. When a foreign operation is disposed of, gains
\nand losses accumulated in equity related to that operation are included in the income statement
\nfor that period.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18500": {
"value": "Fair value hedge The Group uses derivative financial instruments to convert part of its fixed rate debt to floating
\nrate in order to hedge the risks arising from its external borrowings.
\nThe Group designates these as fair value hedges of interest rate risk. Changes in the hedging
\ninstrument are recorded in the income statement, together with any changes in the fair values of
\nthe hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge
\nis effective. Gains or losses relating to any ineffectiveness are immediately recognised in the
\nincome statement.
\n
\n
\n
Cash-flow hedge
\nCash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
\nThe effective portions of changes in the fair values of derivatives that are designated and qualify as
\ncash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. Amounts accumulated in the hedge reserve are
\nrecycled in the income statement in the periods when the hedged items will affect profit or loss (for
\nexample, when the forecast sale that is hedged takes place).
\nIf a forecast transaction that is hedged results in the recognition of a non-financial asset (for
\nexample, inventory) or a liability, the gains and losses previously deferred in the hedge reserve are
\ntransferred from the reserve and included in the initial measurement of the cost of the asset or
\nliability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
\nfor hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains
\nin the reserve and is recognised when the forecast transaction is ultimately recognised in the
\nincome statement.
\nWhen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
\nreported in other comprehensive income is immediately transferred to the income statement.
\nNet investment hedge
\nHedges of net investments in foreign operations are accounted for similarly to cash-flow hedges.
\nAny gain or loss on the hedging instrument relating to the effective portion of the hedge is
\nrecognised in other comprehensive income; the gain or loss relating to any ineffective portion is
\nrecognised immediately in the income statement. When a foreign operation is disposed of, gains
\nand losses accumulated in equity related to that operation are included in the income statement
\nfor that period.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18574": {
"value": "FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The fair values of financial assets and financial liabilities are the amounts at which the instrument
\ncould be exchanged in a current transaction between willing parties, other than in a forced or
\nliquidation sale.
\nIFRS 13: \u2018Fair value measurement\u2019 requires fair value measurements to be classified according to
\nthe following hierarchy:
\n\u2013
Level 1 \u2013 quoted prices in active markets for identical assets or liabilities;
\n\u2013
Level 2 \u2013 valuations in which all inputs are observable either directly (i.e., as prices) or indirectly
\n(i.e., derived from prices); and
\n\u2013
Level 3 \u2013 valuations in which one or more inputs that are significant to the resulting value are
\nnot based on observable market data.
\nSee note 21 for information on the methods which the Group uses to estimate the fair values of its
financial instruments.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18594": {
"value": "DIVIDENDS Dividends are recognised as a liability in the period in which they are authorised. The interim
\ndividend is recognised when it is paid and the final dividend is recognised when it has been
\napproved by shareholders at the Annual General Meeting.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18601": {
"value": "NEW ACCOUNTING STANDARDS EFFECTIVE 2023 No new accounting standards have been adopted in the financial year. The accounting policies
\nadopted in the preparation of these consolidated financial statements are consistent with those
\nfollowed in the previous financial year.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18613": {
"value": "Smiths Group plc",
"dimensions": {
"concept": "ifrs-full:NameOfUltimateParentOfGroup",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18615": {
"value": "England and Wales",
"dimensions": {
"concept": "ifrs-full:DomicileOfEntity",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18616": {
"value": "England and Wales",
"dimensions": {
"concept": "ifrs-full:CountryOfIncorporation",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18617": {
"value": "England and Wales",
"dimensions": {
"concept": "ifrs-full:PrincipalPlaceOfBusiness",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18619": {
"value": "Smiths Group plc",
"dimensions": {
"concept": "ifrs-full:NameOfParentEntity",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18650": {
"value": "1. SEGMENT INFORMATION ANALYSIS BY OPERATING SEGMENT
\nThe Group is organised into four divisions: John Crane; Smiths Detection; Flex-Tek; and Smiths
\nInterconnect. These divisions design, manufacture and support the following products:
\n\u2013
John Crane
\u2013 mechanical seals, seal support systems, power transmission couplings and
\nspecialised filtration systems;
\n\u2013
Smiths Detection
\u2013 sensors and systems that detect and identify explosives, narcotics,
\nweapons, chemical agents, biohazards and contraband;
\n\u2013
Flex-Tek
\u2013 engineered components, flexible hosing and rigid tubing that heat and move fluids
\nand gases; and
\n\u2013
Smiths Interconnect
\u2013 specialised electronic and radio frequency board-level and waveguide
\ndevices, connectors, cables, test sockets and sub-systems used in high-speed, high-reliability,
\nsecure connectivity applications.
\nThe position and performance of each division are reported at each Board meeting to the Board of
\nDirectors. This information is prepared using the same accounting policies as the consolidated
\nfinancial information except that the Group uses headline operating profit to monitor the divisional
\nresults and operating assets to monitor the divisional position. See note 3 and note 29 for an
\nexplanation of which items are excluded from headline measures.
\nIntersegment sales and transfers are charged at arm\u2019s length prices.
\nSEGMENT TRADING PERFORMANCE
\nYear ended 31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
1,079
803
768
387
\u2013
3,037
\nDivisional headline operating
\nprofit
244
90
149
62
\u2013
545
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(44)
(44)
\nHeadline operating profit/(loss)
244
90
149
62
(44)
501
\nItems excluded from headline
\nmeasures (note 3)
(27)
(35)
(18)
(12)
(6)
(98)
\nOperating profit/(loss)
217
55
131
50
(50)
403
\nHeadline operating margin
22.6%
11.2%
19.4%
16.0%
16.5%
\nYear ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
901
655
647
363
\u2013
2,566
\nDivisional headline operating
\nprofit
188
73
133
65
\u2013
459
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(42)
(42)
\nHeadline operating profit/(loss)
188
73
133
65
(42)
417
\nItems excluded from headline
\nmeasures (note 3)
(21)
(37)
(27)
(1)
(214)
(300)
\nOperating profit/(loss)
167
36
106
64
(256)
117
\nHeadline operating margin
20.9%
11.1%
20.6%
18.0%
16.3%
\nOperating profit is stated after charging (crediting) the following items:
\nYear ended 31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
17
10
8
6
1
42
\nDepreciation \u2013 right of use assets
15
7
6
3
1
32
\nAmortisation of capitalised
\ndevelopment costs
\u2013
2
\u2013
\u2013
\u2013
2
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
52
52
\nShare-based payment
3
1
2
2
6
14
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(10)
(10)
\n
\n
\n
Year ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
15
10
7
5
1
38
\nDepreciation \u2013 right of use assets
15
7
5
2
1
30
\nAmortisation of capitalised
\ndevelopment costs
\u2013
3
\u2013
\u2013
\u2013
3
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
51
51
\nShare-based payment
3
2
2
1
4
12
\nRussia impairment charges and
\nrelated closure costs
9
10
\u2013
\u2013
\u2013
19
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(7)
(7)
\nThe corporate and non-headline column comprises central information technology, human
\nresources and headquarters costs and non-headline expenses (see note 3).
\nSEGMENT ASSETS AND LIABILITIES
\nSegment assets
\n31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nProperty, plant, equipment,
\nright of use assets, development
\nprojects, other intangibles and
\ninvestments
162
142
84
66
375
829
\nInventory, trade and other
\nreceivables
489
599
226
160
10
1,484
\nSegment assets
651
741
310
226
385
2,313
\n31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nProperty, plant, equipment,
\nright of use assets, development
\nprojects, other intangibles and
\ninvestments
167
127
84
54
399
831
\nInventory, trade and other
\nreceivables
429
524
244
167
13
1,377
\nSegment assets
596
651
328
221
412
2,208
\nNon-headline assets comprise receivables relating to non-headline items, acquisitions
\nand\u00a0disposals.
\nSegment liabilities
\n31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDivisional liabilities
200
357
91
62
\u2013
710
\nCorporate and non-headline
\nliabilities
\u2013
\u2013
\u2013
\u2013
339
339
\nSegment liabilities
200
357
91
62
339
1,049
\n31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDivisional liabilities
(155)
(347)
(91)
(85)
\u2013
(678)
\nCorporate and non-headline
\nliabilities
\u2013
\u2013
\u2013
\u2013
(385)
(385)
\nSegment liabilities
(155)
(347)
(91)
(85)
(385)
(1,063)
\nNon-headline liabilities comprise provisions and accruals relating to non-headline items,
\nacquisitions and disposals.
\nReconciliation of segment assets and liabilities to statutory assets and liabilities
\nAssets
Liabilities
\n31 July
\n2023
\n\u00a3m
\n31 July
\n2022
\n\u00a3m
\n31 July
\n2023
\n\u00a3m
\n31 July
\n2022
\n\u00a3m
\nSegment assets and liabilities
2,313
2,208
(1,049)
(1,063)
\nGoodwill and acquired intangibles
1,415
1,501
\u2013
\u2013
\nDerivatives
5
4
(20)
(47)
\nCurrent and deferred tax
142
145
(120)
(111)
\nRetirement benefit assets and obligations
195
309
(106)
(115)
\nCash and borrowings
285
1,056
(654)
(1,166)
\nStatutory assets and liabilities
4,355
5,223
(1,949)
(2,502)
\n
\n
Segment capital expenditure
\nThe capital expenditure on property, plant and equipment, capitalised development and other
\nintangible assets for each division is:
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nCapital expenditure year ended
\n31\u00a0July 2023
19
36
10
16
\u2013
81
\nCapital expenditure year ended
\n31\u00a0July 2022
24
23
11
12
1
71
\nSegment capital employed
\nCapital employed is a non-statutory measure of invested resources. It comprises statutory net
\nassets adjusted to add goodwill recognised directly in reserves in respect of subsidiaries acquired
\nbefore 1 August 1998 of \u00a3478m (FY2022: \u00a3478m) and eliminate retirement benefit assets and
\nobligations and litigation provisions relating to non-headline items, both net of related tax, and net
\ndebt. See note 29 for a reconciliation of net assets to capital employed.
\nThe 12-month rolling average capital employed by division, which Smiths uses to calculate
\ndivisional return on capital employed, is:
\n31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nTotal
\n\u00a3m
\nAverage divisional capital employed
1,022
1,154
570
466
3,212
\nAverage corporate capital employed
(16)
\nAverage total capital employed \u2013 continuing
\noperations
3,196
\n31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nTotal
\n\u00a3m
\nAverage divisional capital employed
970
1,019
520
400
2,909
\nAverage corporate capital employed
31
\nAverage total capital employed \u2013 continuing
\noperations
2,940
\nANALYSIS OF REVENUE
\nThe revenue for the main product and service lines for each division is:
\nJohn Crane
\nOriginal
\nequipment
\n\u00a3m
\nAftermarket
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
314
765
1,079
\nRevenue year ended 31 July 2022
279
622
901
\nSmiths Detection
\nAviation
\n\u00a3m
\nOther security
\nsystems
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
535
268
803
\nRevenue year ended 31 July 2022
467
188
655
\nFlex-Tek
\nAerospace
\n\u00a3m
\nIndustrials
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
144
624
768
\nRevenue year ended 31 July 2022
116
531
647
\nSmiths Interconnect
\nComponents,
\nconnectors &
\nsubsystems
\n\u00a3m
\nRevenue year ended 31 July 2023
387
\nRevenue year ended 31 July 2022
363
\nAftermarket sales contributed \u00a31,545m (FY2022: \u00a31,238m) of Group revenue: John Crane
\naftermarket sales were \u00a3765m (FY2022: \u00a3622m); Smiths Detection aftermarket sales were \u00a3413m
\n(FY2022: \u00a3355m); Flex-Tek aftermarket sales were \u00a3367m (FY2022: \u00a3261m); and Smiths
\nInterconnect aftermarket sales were \u00a3nil (FY2022: \u00a3nil).
\n
\n
Divisional revenue is analysed by the Smiths Group key global markets as follows:
\nGeneral
\nIndustrial
\n\u00a3m
\nSafety &
\nSecurity
\n\u00a3m
\nEnergy
\n\u00a3m
\nAerospace
\n\u00a3m
\nTotal
\n\u00a3m
\nJohn Crane
\nRevenue year ended 31 July 2023
423
\u2013
656
\u2013
1,079
\nRevenue year ended 31 July 2022
371
\u2013
530
\u2013
901
\nSmiths Detection
\nRevenue year ended 31 July 2023
\u2013
803
\u2013
\u2013
803
\nRevenue year ended 31 July 2022
\u2013
655
\u2013
\u2013
655
\nFlex Tek
\nRevenue year ended 31 July 2023
624
\u2013
\u2013
144
768
\nRevenue year ended 31 July 2022
531
\u2013
\u2013
116
647
\nSmiths Interconnect
\nRevenue year ended 31 July 2023
190
141
\u2013
56
387
\nRevenue year ended 31 July 2022
166
144
\u2013
53
363
\nTotal
\nRevenue year ended 31 July 2023
1,237
944
656
200
3,037
\nRevenue year ended 31 July 2022
1,068
799
530
169
2,566
\nThe Group\u2019s statutory revenue is analysed as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nSale of goods recognised at a point in time
2,244
1,849
\nSale of goods recognised over time
36
99
\nServices recognised over time
757
618
\n3,037
2,566
\nANALYSIS BY GEOGRAPHICAL AREAS
\nThe Group\u2019s revenue by destination and non-current operating assets by location are shown below:
\nRevenue
\nIntangible assets, right of use
\nassets and property, plant\u00a0and
\nequipment
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nAmericas
1,641
1,423
1,254
1,324
\nEurope
563
480
519
498
\nAsia Pacific
493
421
71
76
\nRest of World
340
242
29
39
\n3,037
2,566
1,873
1,937
\nRevenue by destination attributable to the United Kingdom was \u00a387m (FY2022: \u00a375m). Other
\nrevenue found to be significant included, the United States of America, totalling \u00a31,383m (FY2022:
\n\u00a31,206m), China (excluding Hong Kong) \u00a3150m (FY2022: \u00a3132m) and Germany \u00a3143m (FY2022:
\n\u00a3123m). Revenue by destination has been selected as the basis for attributing revenue to
\ngeographical areas as this was the geographic attribution of revenue used by management to
\nreview business performance.
\nNon-current assets located in the United Kingdom total \u00a3123m (FY2022: \u00a3108m). Significant
\nnon-current assets held in the United States of America \u00a31,181m (FY2022: \u00a31,260m) and Germany
\n\u00a3345m (FY2022: \u00a3340m).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18679": {
"value": "SEGMENT TRADING PERFORMANCE Year ended 31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
1,079
803
768
387
\u2013
3,037
\nDivisional headline operating
\nprofit
244
90
149
62
\u2013
545
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(44)
(44)
\nHeadline operating profit/(loss)
244
90
149
62
(44)
501
\nItems excluded from headline
\nmeasures (note 3)
(27)
(35)
(18)
(12)
(6)
(98)
\nOperating profit/(loss)
217
55
131
50
(50)
403
\nHeadline operating margin
22.6%
11.2%
19.4%
16.0%
16.5%
\nYear ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
901
655
647
363
\u2013
2,566
\nDivisional headline operating
\nprofit
188
73
133
65
\u2013
459
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(42)
(42)
\nHeadline operating profit/(loss)
188
73
133
65
(42)
417
\nItems excluded from headline
\nmeasures (note 3)
(21)
(37)
(27)
(1)
(214)
(300)
\nOperating profit/(loss)
167
36
106
64
(256)
117
\nHeadline operating margin
20.9%
11.1%
20.6%
18.0%
16.3%
\nOperating profit is stated after charging (crediting) the following items:
\nYear ended 31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
17
10
8
6
1
42
\nDepreciation \u2013 right of use assets
15
7
6
3
1
32
\nAmortisation of capitalised
\ndevelopment costs
\u2013
2
\u2013
\u2013
\u2013
2
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
52
52
\nShare-based payment
3
1
2
2
6
14
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(10)
(10)
\n
\n
\n
Year ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
15
10
7
5
1
38
\nDepreciation \u2013 right of use assets
15
7
5
2
1
30
\nAmortisation of capitalised
\ndevelopment costs
\u2013
3
\u2013
\u2013
\u2013
3
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
51
51
\nShare-based payment
3
2
2
1
4
12
\nRussia impairment charges and
\nrelated closure costs
9
10
\u2013
\u2013
\u2013
19
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(7)
(7)
\nThe corporate and non-headline column comprises central information technology, human
\nresources and headquarters costs and non-headline expenses (see note 3)",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradingIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f18682": {
"value": "Year ended 31 July 2023 John Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
1,079
803
768
387
\u2013
3,037
\nDivisional headline operating
\nprofit
244
90
149
62
\u2013
545
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(44)
(44)
\nHeadline operating profit/(loss)
244
90
149
62
(44)
501
\nItems excluded from headline
\nmeasures (note 3)
(27)
(35)
(18)
(12)
(6)
(98)
\nOperating profit/(loss)
217
55
131
50
(50)
403
\nHeadline operating margin
22.6%
11.2%
19.4%
16.0%
16.5%
\nYear ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate
\ncosts
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue
901
655
647
363
\u2013
2,566
\nDivisional headline operating
\nprofit
188
73
133
65
\u2013
459
\nCorporate headline operating
\ncosts
\u2013
\u2013
\u2013
\u2013
(42)
(42)
\nHeadline operating profit/(loss)
188
73
133
65
(42)
417
\nItems excluded from headline
\nmeasures (note 3)
(21)
(37)
(27)
(1)
(214)
(300)
\nOperating profit/(loss)
167
36
106
64
(256)
117
\nHeadline operating margin
20.9%
11.1%
20.6%
18.0%
16.3%
\nOperating profit is stated after charging (crediting) the following items:
\nYear ended 31 July 2023
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
17
10
8
6
1
42
\nDepreciation \u2013 right of use assets
15
7
6
3
1
32
\nAmortisation of capitalised
\ndevelopment costs
\u2013
2
\u2013
\u2013
\u2013
2
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
52
52
\nShare-based payment
3
1
2
2
6
14
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(10)
(10)
\n
\n
\n
Year ended 31 July 2022
\nJohn Crane
\n\u00a3m
\nSmiths
\nDetection
\n\u00a3m
\nFlex-Tek
\n\u00a3m
\nSmiths
\nInterconnect
\n\u00a3m
\nCorporate and
\nnon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nDepreciation \u2013 property, plant
\nand equipment
15
10
7
5
1
38
\nDepreciation \u2013 right of use assets
15
7
5
2
1
30
\nAmortisation of capitalised
\ndevelopment costs
\u2013
3
\u2013
\u2013
\u2013
3
\nAmortisation of software, patents
\nand intellectual property
3
1
\u2013
2
1
7
\nAmortisation of acquired
\nintangibles
\u2013
\u2013
\u2013
\u2013
51
51
\nShare-based payment
3
2
2
1
4
12
\nRussia impairment charges and
\nrelated closure costs
9
10
\u2013
\u2013
\u2013
19
\nTransition services cost
\nreimbursement
\u2013
\u2013
\u2013
\u2013
(7)
(7)
\nThe corporate and non-headline column comprises central information technology, human
\nresources and headquarters costs and non-headline expenses (see note 3).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f19332": {
"value": "ANALYSIS OF REVENUE The revenue for the main product and service lines for each division is:
\nJohn Crane
\nOriginal
\nequipment
\n\u00a3m
\nAftermarket
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
314
765
1,079
\nRevenue year ended 31 July 2022
279
622
901
\nSmiths Detection
\nAviation
\n\u00a3m
\nOther security
\nsystems
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
535
268
803
\nRevenue year ended 31 July 2022
467
188
655
\nFlex-Tek
\nAerospace
\n\u00a3m
\nIndustrials
\n\u00a3m
\nTotal
\n\u00a3m
\nRevenue year ended 31 July 2023
144
624
768
\nRevenue year ended 31 July 2022
116
531
647
\nSmiths Interconnect
\nComponents,
\nconnectors &
\nsubsystems
\n\u00a3m
\nRevenue year ended 31 July 2023
387
\nRevenue year ended 31 July 2022
363
\nAftermarket sales contributed \u00a31,545m (FY2022: \u00a31,238m) of Group revenue: John Crane
\naftermarket sales were \u00a3765m (FY2022: \u00a3622m); Smiths Detection aftermarket sales were \u00a3413m
\n(FY2022: \u00a3355m); Flex-Tek aftermarket sales were \u00a3367m (FY2022: \u00a3261m); and Smiths
\nInterconnect aftermarket sales were \u00a3nil (FY2022: \u00a3nil).
\n
\n
Divisional revenue is analysed by the Smiths Group key global markets as follows:
\nGeneral
\nIndustrial
\n\u00a3m
\nSafety &
\nSecurity
\n\u00a3m
\nEnergy
\n\u00a3m
\nAerospace
\n\u00a3m
\nTotal
\n\u00a3m
\nJohn Crane
\nRevenue year ended 31 July 2023
423
\u2013
656
\u2013
1,079
\nRevenue year ended 31 July 2022
371
\u2013
530
\u2013
901
\nSmiths Detection
\nRevenue year ended 31 July 2023
\u2013
803
\u2013
\u2013
803
\nRevenue year ended 31 July 2022
\u2013
655
\u2013
\u2013
655
\nFlex Tek
\nRevenue year ended 31 July 2023
624
\u2013
\u2013
144
768
\nRevenue year ended 31 July 2022
531
\u2013
\u2013
116
647
\nSmiths Interconnect
\nRevenue year ended 31 July 2023
190
141
\u2013
56
387
\nRevenue year ended 31 July 2022
166
144
\u2013
53
363
\nTotal
\nRevenue year ended 31 July 2023
1,237
944
656
200
3,037
\nRevenue year ended 31 July 2022
1,068
799
530
169
2,566
\nThe Group\u2019s statutory revenue is analysed as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nSale of goods recognised at a point in time
2,244
1,849
\nSale of goods recognised over time
36
99
\nServices recognised over time
757
618
\n3,037
2,566",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRevenueExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f19572": {
"value": "2. OPERATING COSTS The Group\u2019s operating costs for continuing operations are analysed as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nCost of sales \u2013 direct materials,
\nlabour, production and
\ndistribution overheads
1,919
\u2013
1,919
1,605
\u2013
1,605
\nSelling costs
221
\u2013
221
200
\u2013
200
\nAdministrative expenses
406
98
504
351
300
651
\nTransition services cost
\nreimbursement
(10)
\u2013
(10)
(7)
\u2013
(7)
\nTotal
2,536
98
2,634
2,149
300
2,449
\nFollowing the sale of the Smiths Medical business, the Group has provided transition services to
\nthe Smiths Medical Group, which is disclosed above as transition services cost reimbursement.
\nOPERATING PROFIT IS STATED AFTER CHARGING (CREDITING):
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nResearch and development expense
73
80
\nDepreciation of property, plant and equipment
42
38
\nDepreciation of right of use assets
32
30
\nAmortisation of intangible assets
61
61
\nRussia impairment and related closure costs
\u2013
19
\nTransition services cost reimbursement
(10)
(7)
\nResearch and development (R&D) cash costs were \u00a3113m (FY2022: \u00a3107m) comprising \u00a373m
\n(FY2022: \u00a380m) of R&D expensed to the income statement, \u00a321m (FY2022: \u00a312m) of capitalised
\ncosts and \u00a319m (FY2022: \u00a315m) of customer funded R&D.
\nAdministrative expenses include \u00a32m (FY2022: \u00a33m) in respect of lease payments for short-term
\nand low-value leases which were not included within right of use assets and lease liabilities.
\n
\n
AUDITORS\u2019 REMUNERATION
\nThe following fees were paid or are payable to the Company\u2019s auditors, KPMG LLP and other
\nfirms in the KPMG network, for the year ended 31 July 2023.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n(represented)
\n\u00a3m
\nAudit services
\nFees payable to the Company\u2019s auditors for the audit of the Company\u2019s
\nannual financial statements
2.6
3.0
\nFees payable to the Company\u2019s auditors and its associates for other
\nservices:
\n\u2013 the audit of the Company\u2019s subsidiaries
5.5
4.7
\n8.1
7.7
\nAll other services
0.5
0.8
\nOther services comprise audit-related assurance services of \u00a30.5m (FY2022: \u00a30.5m) and fees for
\nreporting accountant services in connection with a class 1 disposal of \u00a3nil (FY2022: \u00a30.3m).
\nAudit-related assurance services include the review of the Interim Report and the limited
\nassurance of the Group\u2019s Scope 1-3 Greenhouse Gas emissions metrics. Total fees for non-audit
\nservices comprise 6% (FY2022: 10%) of audit fees.
\nIn the current year, the Group has agreed \u00a30.3m of additional fees with the Group auditors relating
\nto the audit of the prior year financial statements.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f19573": {
"value": "2. OPERATING COSTS The Group\u2019s operating costs for continuing operations are analysed as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nCost of sales \u2013 direct materials,
\nlabour, production and
\ndistribution overheads
1,919
\u2013
1,919
1,605
\u2013
1,605
\nSelling costs
221
\u2013
221
200
\u2013
200
\nAdministrative expenses
406
98
504
351
300
651
\nTransition services cost
\nreimbursement
(10)
\u2013
(10)
(7)
\u2013
(7)
\nTotal
2,536
98
2,634
2,149
300
2,449
\nFollowing the sale of the Smiths Medical business, the Group has provided transition services to
\nthe Smiths Medical Group, which is disclosed above as transition services cost reimbursement.
\nOPERATING PROFIT IS STATED AFTER CHARGING (CREDITING):
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nResearch and development expense
73
80
\nDepreciation of property, plant and equipment
42
38
\nDepreciation of right of use assets
32
30
\nAmortisation of intangible assets
61
61
\nRussia impairment and related closure costs
\u2013
19
\nTransition services cost reimbursement
(10)
(7)
\nResearch and development (R&D) cash costs were \u00a3113m (FY2022: \u00a3107m) comprising \u00a373m
\n(FY2022: \u00a380m) of R&D expensed to the income statement, \u00a321m (FY2022: \u00a312m) of capitalised
\ncosts and \u00a319m (FY2022: \u00a315m) of customer funded R&D.
\nAdministrative expenses include \u00a32m (FY2022: \u00a33m) in respect of lease payments for short-term
\nand low-value leases which were not included within right of use assets and lease liabilities.
\n
\n
AUDITORS\u2019 REMUNERATION
\nThe following fees were paid or are payable to the Company\u2019s auditors, KPMG LLP and other
\nfirms in the KPMG network, for the year ended 31 July 2023.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n(represented)
\n\u00a3m
\nAudit services
\nFees payable to the Company\u2019s auditors for the audit of the Company\u2019s
\nannual financial statements
2.6
3.0
\nFees payable to the Company\u2019s auditors and its associates for other
\nservices:
\n\u2013 the audit of the Company\u2019s subsidiaries
5.5
4.7
\n8.1
7.7
\nAll other services
0.5
0.8
\nOther services comprise audit-related assurance services of \u00a30.5m (FY2022: \u00a30.5m) and fees for
\nreporting accountant services in connection with a class 1 disposal of \u00a3nil (FY2022: \u00a30.3m).
\nAudit-related assurance services include the review of the Interim Report and the limited
\nassurance of the Group\u2019s Scope 1-3 Greenhouse Gas emissions metrics. Total fees for non-audit
\nservices comprise 6% (FY2022: 10%) of audit fees.
\nIn the current year, the Group has agreed \u00a30.3m of additional fees with the Group auditors relating
\nto the audit of the prior year financial statements.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfExpensesByNatureExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f19574": {
"value": "2. OPERATING COSTS The Group\u2019s operating costs for continuing operations are analysed as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nCost of sales \u2013 direct materials,
\nlabour, production and
\ndistribution overheads
1,919
\u2013
1,919
1,605
\u2013
1,605
\nSelling costs
221
\u2013
221
200
\u2013
200
\nAdministrative expenses
406
98
504
351
300
651
\nTransition services cost
\nreimbursement
(10)
\u2013
(10)
(7)
\u2013
(7)
\nTotal
2,536
98
2,634
2,149
300
2,449
\nFollowing the sale of the Smiths Medical business, the Group has provided transition services to
\nthe Smiths Medical Group, which is disclosed above as transition services cost reimbursement.
\nOPERATING PROFIT IS STATED AFTER CHARGING (CREDITING):
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nResearch and development expense
73
80
\nDepreciation of property, plant and equipment
42
38
\nDepreciation of right of use assets
32
30
\nAmortisation of intangible assets
61
61
\nRussia impairment and related closure costs
\u2013
19
\nTransition services cost reimbursement
(10)
(7)
\nResearch and development (R&D) cash costs were \u00a3113m (FY2022: \u00a3107m) comprising \u00a373m
\n(FY2022: \u00a380m) of R&D expensed to the income statement, \u00a321m (FY2022: \u00a312m) of capitalised
\ncosts and \u00a319m (FY2022: \u00a315m) of customer funded R&D.
\nAdministrative expenses include \u00a32m (FY2022: \u00a33m) in respect of lease payments for short-term
\nand low-value leases which were not included within right of use assets and lease liabilities.
\n
\n
AUDITORS\u2019 REMUNERATION
\nThe following fees were paid or are payable to the Company\u2019s auditors, KPMG LLP and other
\nfirms in the KPMG network, for the year ended 31 July 2023.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n(represented)
\n\u00a3m
\nAudit services
\nFees payable to the Company\u2019s auditors for the audit of the Company\u2019s
\nannual financial statements
2.6
3.0
\nFees payable to the Company\u2019s auditors and its associates for other
\nservices:
\n\u2013 the audit of the Company\u2019s subsidiaries
5.5
4.7
\n8.1
7.7
\nAll other services
0.5
0.8
\nOther services comprise audit-related assurance services of \u00a30.5m (FY2022: \u00a30.5m) and fees for
\nreporting accountant services in connection with a class 1 disposal of \u00a3nil (FY2022: \u00a30.3m).
\nAudit-related assurance services include the review of the Interim Report and the limited
\nassurance of the Group\u2019s Scope 1-3 Greenhouse Gas emissions metrics. Total fees for non-audit
\nservices comprise 6% (FY2022: 10%) of audit fees.
\nIn the current year, the Group has agreed \u00a30.3m of additional fees with the Group auditors relating
\nto the audit of the prior year financial statements.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfExpensesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f19580": {
"value": "Year ended 31 July 2023 Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nCost of sales \u2013 direct materials,
\nlabour, production and
\ndistribution overheads
1,919
\u2013
1,919
1,605
\u2013
1,605
\nSelling costs
221
\u2013
221
200
\u2013
200
\nAdministrative expenses
406
98
504
351
300
651
\nTransition services cost
\nreimbursement
(10)
\u2013
(10)
(7)
\u2013
(7)
\nTotal
2,536
98
2,634
2,149
300
2,449
\nFollowing the sale of the Smiths Medical business, the Group has provided transition services to
\nthe Smiths Medical Group, which is disclosed above as transition services cost reimbursement.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCostOfSalesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f19581": {
"value": "Year ended 31 July 2023 Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n(note 3)
\n\u00a3m
\nTotal
\n\u00a3m
\nCost of sales \u2013 direct materials,
\nlabour, production and
\ndistribution overheads
1,919
\u2013
1,919
1,605
\u2013
1,605
\nSelling costs
221
\u2013
221
200
\u2013
200
\nAdministrative expenses
406
98
504
351
300
651
\nTransition services cost
\nreimbursement
(10)
\u2013
(10)
(7)
\u2013
(7)
\nTotal
2,536
98
2,634
2,149
300
2,449
\nFollowing the sale of the Smiths Medical business, the Group has provided transition services to
\nthe Smiths Medical Group, which is disclosed above as transition services cost reimbursement.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f19703": {
"value": "AUDITORS\u2019 REMUNERATION The following fees were paid or are payable to the Company\u2019s auditors, KPMG LLP and other
\nfirms in the KPMG network, for the year ended 31 July 2023.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n(represented)
\n\u00a3m
\nAudit services
\nFees payable to the Company\u2019s auditors for the audit of the Company\u2019s
\nannual financial statements
2.6
3.0
\nFees payable to the Company\u2019s auditors and its associates for other
\nservices:
\n\u2013 the audit of the Company\u2019s subsidiaries
5.5
4.7
\n8.1
7.7
\nAll other services
0.5
0.8
\nOther services comprise audit-related assurance services of \u00a30.5m (FY2022: \u00a30.5m) and fees for
\nreporting accountant services in connection with a class 1 disposal of \u00a3nil (FY2022: \u00a30.3m).
\nAudit-related assurance services include the review of the Interim Report and the limited
\nassurance of the Group\u2019s Scope 1-3 Greenhouse Gas emissions metrics. Total fees for non-audit
\nservices comprise 6% (FY2022: 10%) of audit fees.
\nIn the current year, the Group has agreed \u00a30.3m of additional fees with the Group auditors relating
to the audit of the prior year financial statements.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20015": {
"value": "II. DISCONTINUED OPERATIONS The non-headline items for discontinued operations were as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nNon-headline operating profit items
\nMedfusion documentation remediation costs
\u2013
(33)
\nImpairment of investment in Ivenix, Inc. convertible debt
\u2013
(14)
\nNon-headline finance costs items
\nForeign exchange loss on intercompany loan with parent
\u2013
(22)
\nGain on sale of discontinued operation
\nGain on the sale of Smiths Medical to ICU Medical, Inc.
6
1,036
\nNon-headline taxation items
\nTax on non-headline loss
\u2013
6
\nNon-headline items in profit from discontinued
\noperations
6
973
\nProfit for the year \u2013 non-headline items for continuing
\nand discontinued operations
(113)
714
\nIn the current year the Group has recognised an additional \u00a36m gain on transactions related to
\nthe sale of Smiths Medical. An \u00a311m credit was released in respect of disposal and restructuring
\nprovisions, that are no longer required, and an offsetting additional \u00a35m of provisions were
\ncharged in respect of potential indemnity, litigation and arbitration costs. These items are
\nconsidered to be non-headline as they relate to discontinued former business activities.
\nIn the prior period:
\n\u2013
Smiths Medical recognised a \u00a333m provision against the costs of the remediation actions
\nrequired to address each of the observations and discussion items contained in the US Food
\nand Drug Administration \u2018for-cause\u2019 audit findings on the Medfusion product range; and
\n\u2013
The decision by Smiths Medical to exit its commercial agreement with Ivenix, Inc. triggered an
\nindicator of impairment to the carrying value of the Smiths Medical investment in Ivenix, Inc.
\nand management impaired the entire \u00a314m value of Smiths Medical\u2019s investment; and
\n\u2013
The \u00a322m foreign exchange loss on intercompany loan with parent directly offsets the foreign
\nexchange gain in continuing operations.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDiscontinuedOperationsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20016": {
"value": "II. DISCONTINUED OPERATIONS The non-headline items for discontinued operations were as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nNon-headline operating profit items
\nMedfusion documentation remediation costs
\u2013
(33)
\nImpairment of investment in Ivenix, Inc. convertible debt
\u2013
(14)
\nNon-headline finance costs items
\nForeign exchange loss on intercompany loan with parent
\u2013
(22)
\nGain on sale of discontinued operation
\nGain on the sale of Smiths Medical to ICU Medical, Inc.
6
1,036
\nNon-headline taxation items
\nTax on non-headline loss
\u2013
6
\nNon-headline items in profit from discontinued
\noperations
6
973
\nProfit for the year \u2013 non-headline items for continuing
\nand discontinued operations
(113)
714
\nIn the current year the Group has recognised an additional \u00a36m gain on transactions related to
\nthe sale of Smiths Medical. An \u00a311m credit was released in respect of disposal and restructuring
\nprovisions, that are no longer required, and an offsetting additional \u00a35m of provisions were
\ncharged in respect of potential indemnity, litigation and arbitration costs. These items are
\nconsidered to be non-headline as they relate to discontinued former business activities.
\nIn the prior period:
\n\u2013
Smiths Medical recognised a \u00a333m provision against the costs of the remediation actions
\nrequired to address each of the observations and discussion items contained in the US Food
\nand Drug Administration \u2018for-cause\u2019 audit findings on the Medfusion product range; and
\n\u2013
The decision by Smiths Medical to exit its commercial agreement with Ivenix, Inc. triggered an
\nindicator of impairment to the carrying value of the Smiths Medical investment in Ivenix, Inc.
\nand management impaired the entire \u00a314m value of Smiths Medical\u2019s investment; and
\n\u2013
The \u00a322m foreign exchange loss on intercompany loan with parent directly offsets the foreign
\nexchange gain in continuing operations.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20073": {
"value": "4. NET FINANCE COSTS Notes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20074": {
"value": "4. NET FINANCE COSTS Notes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20075": {
"value": "4. NET FINANCE COSTS Notes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20076": {
"value": "4. NET FINANCE COSTS Notes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20077": {
"value": "4. NET FINANCE COSTS Notes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20078": {
"value": "4. NET FINANCE COSTS Notes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)18. BORROWINGS AND NET DEBT This note sets out the calculation of net debt, an important measure in explaining our
\nfinancing\u00a0position. Net debt includes accrued interest and fair value adjustments relating to
\nhedge\u00a0accounting.
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash and cash equivalents
\nNet cash and deposits
285
1,056
\nShort-term borrowings
\n\u20ac600m 1.25% Eurobond 2023
\u2013
(502)
\nOverdrafts
\u2013
(1)
\nLease liabilities
(26)
(29)
\nInterest accrual
(3)
(6)
\n(29)
(538)
\nLong-term borrowings
\n\u20ac650m 2.00% Eurobond 2027
(534)
(538)
\nLease liabilities
(91)
(90)
\n(625)
(628)
\nBorrowings/gross debt
(654)
(1,166)
\nDerivatives managing interest rate risk and currency profile of the debt
(18)
(40)
\nNet debt
(387)
(150)
\nCASH AND CASH EQUIVALENTS
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash at bank and in hand
175
242
\nShort-term deposits
110
814
\nCash and cash equivalents
285
1,056
\nCash and cash equivalents include highly liquid investments with maturities of three months or
\nless. Borrowings are accounted for at amortised cost and are categorised as other financial
\nliabilities. See note 18 for a maturity analysis of\u00a0borrowings. Interest of \u00a317m (FY2022:\u00a0\u00a330m) was
\ncharged to the consolidated income statement in the period in respect of public bonds.
\nANALYSIS OF FINANCIAL DERIVATIVES ON BALANCE SHEET
\nNon-current
\nassets
\n\u00a3m
\nCurrent
\nassets
\n\u00a3m
\nCurrent
\nliabilities
\n\u00a3m
\nNon-current
\nliabilities
\n\u00a3m
\nNet balance
\n\u00a3m
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
\u2013
(18)
(18)
\nForeign exchange forward contracts
\u2013
5
(2)
\u2013
3
\nAt 31 July 2023
\u2013
5
(2)
(18)
(15)
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
(20)
(20)
(40)
\nForeign exchange forward contracts
\u2013
4
(7)
\u2013
(3)
\nAt 31 July 2022
\u2013
4
(27)
(20)
(43)
\nMOVEMENTS IN ASSETS/(LIABILITIES) ARISING FROM FINANCING ACTIVITIES
\nChanges in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\nForeign exchange
\ngains/(losses)
(10)
(21)
(10)
\u2013
(41)
(4,031)
(4,072)
\nNet cash inflow
\nfrom continuing
\noperations
(761)
564
\u2013
8
(189)
4,031
3,842
\nNet movement
\nfrom new leases
\nand modifications
\u2013
(34)
\u2013
\u2013
(34)
\u2013
(34)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
(2)
16
\u2013
14
\u2013
14
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
14
14
6
20
\nInterest expense
\ntaken to income
\nstatement*
\u2013
28
\u2013
\u2013
28
\u2013
28
\nInterest paid
\u2013
(29)
\u2013
\u2013
(29)
\u2013
(29)
\nReclassifications
\u2013
3
(3)
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2023
285
(29)
(625)
(18)
(387)
3
(384)
\n*
The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\n
\n
\n
Changes in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2021
405
(36)
(1,466)
75
(1,022)
1
(1,021)
\nForeign exchange
\ngains/(losses)
62
(3)
4
\u2013
63
(6,799)
(6,736)
\nNet cash inflow
\nfrom continuing
\noperations*
589
34
295
\u2013
918
6,799
7,717
\nNet movement
\nfrom lease
\nmodifications
\u2013
(22)
\u2013
\u2013
(22)
\u2013
(22)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
2
27
\u2013
29
\u2013
29
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
(115)
(115)
(4)
(119)
\nInterest expense
\ntaken to income
\nstatement**
\u2013
(35)
\u2013
\u2013
(35)
\u2013
(35)
\nInterest paid
\u2013
\u2013
34
\u2013
34
\u2013
34
\nReclassifications
\u2013
(478)
478
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\n*
In FY22, the net cash inflow for the total Group including discontinued operations was \u00a3589m, \u00a357m of which related to
\nthe cash held by Smiths Medical at the time of disposal.
\n** The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\nCASH POOLING
\nCash and overdraft balances in interest compensation cash pooling systems are reported gross
\non the balance sheet. The cash pooling agreements incorporate a legally enforceable right of
\nnet\u00a0settlement. However, as there is no intention to settle the balances net, these arrangements
\ndo not qualify for net presentation. At 31 July 2023 the total value of overdrafts on accounts in
\ninterest compensation cash pooling systems was \u00a3nil (FY2022: \u00a3nil). The balances held in zero
\nbalancing cash pooling arrangements have daily settlement of balances. Therefore netting is
\nnot\u00a0relevant.
\nCHANGE OF CONTROL
\nThe Company has in place credit facility agreements under which a change of control would
\ntrigger prepayment clauses. The Company has one bond in issue, the terms of which would allow
\nbondholders to exercise put options and require the Company to buy back the bonds at their
\nprincipal amount plus interest if a rating downgrade occurs at the same time as a change of
\ncontrol takes effect.
\nLEASE LIABILITIES
\nLease liabilities have been measured at the present value of the remaining lease payments.
\nThe\u00a0weighted average incremental borrowing rate applied to lease liabilities in FY2023 was 4.01%
\n(FY2022: 3.63%).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20079": {
"value": "4. NET FINANCE COSTS Notes
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nInterest income
36
14
\nInterest expense:
\n\u2013 bank loans and overdrafts, including associated fees
(50)
(12)
\n\u2013 other loans
(17)
(40)
\n\u2013 interest on leases
(4)
(3)
\nInterest expense
(71)
(55)
\nHeadline net finance costs
(35)
(41)
\nOther financing gains/(losses):
\n\u2013 valuation movements on fair value hedged debt
(9)
(32)
\n\u2013 valuation movements on fair value derivatives
9
33
\n\u2013 foreign exchange and ineffectiveness on net investment
\nhedges
(3)
(2)
\n\u2013 retranslation of foreign currency bank balances
2
(1)
\n\u2013 interest on overdue VAT
(7)
\u2013
\n\u2013 other items including counterparty credit risk
\nadjustments and non-hedge accounted derivatives
\u2013
2
\nOther financing gains/(losses)
(8)
\u2013
\nNon-headline finance cost items:
\nForeign exchange gain on intercompany loan with
\ndiscontinued operations
3
\u2013
22
\nUnwind of discount on provisions
3
(7)
(3)
\nFair value gain on investment in early stage business
14
\u2013
1
\nNet interest income on retirement benefit obligations
8
7
7
\nNon-headline finance cost items
\u2013
27
\nNet finance costs
(43)
(14)18. BORROWINGS AND NET DEBT This note sets out the calculation of net debt, an important measure in explaining our
\nfinancing\u00a0position. Net debt includes accrued interest and fair value adjustments relating to
\nhedge\u00a0accounting.
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash and cash equivalents
\nNet cash and deposits
285
1,056
\nShort-term borrowings
\n\u20ac600m 1.25% Eurobond 2023
\u2013
(502)
\nOverdrafts
\u2013
(1)
\nLease liabilities
(26)
(29)
\nInterest accrual
(3)
(6)
\n(29)
(538)
\nLong-term borrowings
\n\u20ac650m 2.00% Eurobond 2027
(534)
(538)
\nLease liabilities
(91)
(90)
\n(625)
(628)
\nBorrowings/gross debt
(654)
(1,166)
\nDerivatives managing interest rate risk and currency profile of the debt
(18)
(40)
\nNet debt
(387)
(150)
\nCASH AND CASH EQUIVALENTS
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash at bank and in hand
175
242
\nShort-term deposits
110
814
\nCash and cash equivalents
285
1,056
\nCash and cash equivalents include highly liquid investments with maturities of three months or
\nless. Borrowings are accounted for at amortised cost and are categorised as other financial
\nliabilities. See note 18 for a maturity analysis of\u00a0borrowings. Interest of \u00a317m (FY2022:\u00a0\u00a330m) was
\ncharged to the consolidated income statement in the period in respect of public bonds.
\nANALYSIS OF FINANCIAL DERIVATIVES ON BALANCE SHEET
\nNon-current
\nassets
\n\u00a3m
\nCurrent
\nassets
\n\u00a3m
\nCurrent
\nliabilities
\n\u00a3m
\nNon-current
\nliabilities
\n\u00a3m
\nNet balance
\n\u00a3m
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
\u2013
(18)
(18)
\nForeign exchange forward contracts
\u2013
5
(2)
\u2013
3
\nAt 31 July 2023
\u2013
5
(2)
(18)
(15)
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
(20)
(20)
(40)
\nForeign exchange forward contracts
\u2013
4
(7)
\u2013
(3)
\nAt 31 July 2022
\u2013
4
(27)
(20)
(43)
\nMOVEMENTS IN ASSETS/(LIABILITIES) ARISING FROM FINANCING ACTIVITIES
\nChanges in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\nForeign exchange
\ngains/(losses)
(10)
(21)
(10)
\u2013
(41)
(4,031)
(4,072)
\nNet cash inflow
\nfrom continuing
\noperations
(761)
564
\u2013
8
(189)
4,031
3,842
\nNet movement
\nfrom new leases
\nand modifications
\u2013
(34)
\u2013
\u2013
(34)
\u2013
(34)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
(2)
16
\u2013
14
\u2013
14
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
14
14
6
20
\nInterest expense
\ntaken to income
\nstatement*
\u2013
28
\u2013
\u2013
28
\u2013
28
\nInterest paid
\u2013
(29)
\u2013
\u2013
(29)
\u2013
(29)
\nReclassifications
\u2013
3
(3)
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2023
285
(29)
(625)
(18)
(387)
3
(384)
\n*
The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\n
\n
\n
Changes in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2021
405
(36)
(1,466)
75
(1,022)
1
(1,021)
\nForeign exchange
\ngains/(losses)
62
(3)
4
\u2013
63
(6,799)
(6,736)
\nNet cash inflow
\nfrom continuing
\noperations*
589
34
295
\u2013
918
6,799
7,717
\nNet movement
\nfrom lease
\nmodifications
\u2013
(22)
\u2013
\u2013
(22)
\u2013
(22)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
2
27
\u2013
29
\u2013
29
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
(115)
(115)
(4)
(119)
\nInterest expense
\ntaken to income
\nstatement**
\u2013
(35)
\u2013
\u2013
(35)
\u2013
(35)
\nInterest paid
\u2013
\u2013
34
\u2013
34
\u2013
34
\nReclassifications
\u2013
(478)
478
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\n*
In FY22, the net cash inflow for the total Group including discontinued operations was \u00a3589m, \u00a357m of which related to
\nthe cash held by Smiths Medical at the time of disposal.
\n** The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\nCASH POOLING
\nCash and overdraft balances in interest compensation cash pooling systems are reported gross
\non the balance sheet. The cash pooling agreements incorporate a legally enforceable right of
\nnet\u00a0settlement. However, as there is no intention to settle the balances net, these arrangements
\ndo not qualify for net presentation. At 31 July 2023 the total value of overdrafts on accounts in
\ninterest compensation cash pooling systems was \u00a3nil (FY2022: \u00a3nil). The balances held in zero
\nbalancing cash pooling arrangements have daily settlement of balances. Therefore netting is
\nnot\u00a0relevant.
\nCHANGE OF CONTROL
\nThe Company has in place credit facility agreements under which a change of control would
\ntrigger prepayment clauses. The Company has one bond in issue, the terms of which would allow
\nbondholders to exercise put options and require the Company to buy back the bonds at their
\nprincipal amount plus interest if a rating downgrade occurs at the same time as a change of
\ncontrol takes effect.
\nLEASE LIABILITIES
\nLease liabilities have been measured at the present value of the remaining lease payments.
\nThe\u00a0weighted average incremental borrowing rate applied to lease liabilities in FY2023 was 4.01%
\n(FY2022: 3.63%).
\n19. FINANCIAL RISK MANAGEMENT
\nThe Group\u2019s international operations and debt financing expose it to financial risks which include
\nthe effects of changes in foreign exchange rates, debt market prices, interest rates, credit risks
\nand liquidity risks. The management of operational credit risk is discussed in note 16.
\nTREASURY RISK MANAGEMENT POLICY
\nThe Board maintains a Treasury Risk Management Policy, which governs the treasury operations
\nof the Group and its subsidiary companies and the consolidated financial risk profile to be
\nmaintained. A report on treasury activities, financial metrics and compliance with the Policy is
\ncirculated to the Chief Financial Officer each month and key elements to the Audit & Risk
\nCommittee on a semi-annual basis.
\nThe Policy maintains a treasury control framework within which counterparty risk, financing
\nand\u00a0debt strategy, cash and liquidity, interest rate risk and currency translation management
\nare\u00a0reserved for Group Treasury, while currency transaction management is devolved to
\noperating divisions.
\nCentrally directed cash management systems exist globally to manage overall liquid resources
\nefficiently across the divisions. The Group uses financial instruments to raise financing for its
\nglobal operations, to manage related interest rate and currency financial risk, and to hedge
\ntransaction risk within subsidiary companies.
\nThe Group does not speculate in financial instruments. All financial instruments hedge existing
\nbusiness exposures and all are recognised on the balance sheet.
\nThe Policy defines four treasury risk components and for each component a set of financial
\nmetrics to be measured and reported monthly against pre-agreed objectives.
\n1) Credit quality
\nThe Group\u2019s strategy is to maintain a solid investment-grade rating to ensure access to the widest
\npossible sources of financing at the right time and to optimise the resulting cost of debt capital.
\nThe credit ratings at the end of July 2023 were BBB+ / Baa2 (both stable) from Standard & Poor\u2019s
\nand Moody\u2019s respectively. An essential element of an investment-grade rating is consistent and
\nrobust cash-flow metrics. The Group\u2019s objective is to maintain a net debt/headline EBITDA ratio of
\ntwo times or lower over the medium term. Capital management is discussed in more detail in
\nnote 26.
\n2) Debt and interest rate
\nThe Group\u2019s risk management objectives are to ensure that the majority of funding is drawn from
\nthe public debt markets with the average maturity profile of gross debt to be at or greater than
\nthree years, and between 40-60% of gross debt (excluding leases) is at fixed rates. At 31 July 2023
\nthese measures were 100% (FY2022: 100%), 3.6 years (FY2022: 2.7 years) and 54% (FY2022: 44%).
\n
\n
\n
The Group has no financial covenants in its external debt agreements. Interest rate risk
\nmanagement is discussed in note 19(b).
\n3) Liquidity management
\nThe Group\u2019s objective is to ensure that at any time undrawn committed facilities, net of short-
\nterm overdraft financing, are at least \u00a3300m and that committed facilities have at least 12 months
\nto run until maturity. At 31 July 2023, these measures were \u00a3622m (FY2022: \u00a3657m) and 57
\nmonths (FY2022: 27 months). At 31 July 2023, net cash resources were \u00a3285m (FY2022: \u00a31,055m).
\nLiquidity risk management is discussed in note 19(d).
\n4) Currency management
\nThe Group is an international business with the majority of its net assets denominated in foreign
\ncurrency. It protects the balance sheet and reserves from adverse foreign exchange movements
\nby financing foreign currency assets where appropriate in the same currency. The Group\u2019s
\nobjective for managing transaction currency exposure is to reduce medium-term volatility to
\ncash-flow, margins and earnings. Foreign exchange risk management is discussed in note 19(a)
\nbelow.
\n(A) FOREIGN EXCHANGE RISK
\nTransactional currency exposure
\nThe Group is exposed to foreign currency risks arising from sales or purchases by businesses in
\ncurrencies other than their functional currency. It is Group policy that, when the net foreign
\nexchange exposure to known future sales and purchases is material, this exposure is hedged
\nusing forward foreign exchange contracts. The net exposure is calculated by adjusting the
\nexpected cash-flow for payments or receipts in the same currency linked to the sale or purchase.
\nThis policy minimises the risk that the profits generated from the transaction will be affected by
\nforeign exchange movements which occur after the price has been determined. Hedge accounting
\ndocumentation and effectiveness testing are only undertaken if it is cost-effective.
\nThe following table shows the currency of financial instruments. It excludes loans and derivatives
\ndesignated as net investment hedges.
\nAt 31 July 2023
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
43
372
127
184
726
\nFinancial instruments included in trade and
\nother payables
(64)
(216)
(93)
(103)
(476)
\nCash and cash equivalents
50
115
29
91
285
\nBorrowings not designated as net investment
\nhedges
(27)
(54)
(12)
(24)
(117)
\n2
217
51
148
418
\nExclude balances held in operations with the
\nsame functional currency.
(7)
(287)
(57)
(153)
(504)
\nExposure arising from intra-Group loans
\u2013
127
28
(73)
82
\nFuture forward foreign exchange contract
\ncash-flows
(63)
(23)
(48)
133
(1)
\n(68)
34
(26)
55
(5)
\nAt 31 July 2022
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
41
423
114
169
747
\nFinancial instruments included in trade and
\nother payables
(52)
(239)
(98)
(101)
(490)
\nCash and cash equivalents
355
506
74
120
1,055
\nBorrowings not designated as net investment
\nhedges
(28)
(58)
(14)
(19)
(119)
\n316
632
76
169
1,193
\nExclude balances held in operations with the
\nsame functional currency.
(322)
(149)
(80)
(142)
(693)
\nExposure arising from intra-Group loans
\u2013
(419)
(27)
(89)
(535)
\nFuture forward foreign exchange contract
\ncash-flows
(42)
(40)
(38)
120
\u2013
\n(48)
24
(69)
58
(35)
\nFinancial instruments included in trade and other receivables comprise trade receivables,
\naccrued income and other receivables which qualify as financial instruments. Similarly, financial
\ninstruments included in trade and other payables comprise trade payables, accrued expenses
\nand other payables that qualify as financial instruments.
\n
\n
\n
Based on the assets and liabilities held at the year-end, if the specified currencies were to
\nstrengthen 10% while all other market rates remained constant, the change in the fair value of
\nfinancial instruments not designated as net investment hedges would have the following\u00a0effect:
\nImpact on
\nprofit
\nfor the year
\nFY2023
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2023
\n\u00a3m
\nImpact on
\nprofit
\nfor the year
\nFY2022
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2022
\n\u00a3m
\nUS dollar
\u2013
1
(3)
1
\nEuro
1
\u2013
8
(1)
\nSterling
\u2013
(1)
4
\u2013
\nThese sensitivities were calculated before adjusting for tax and exclude the effect of quasi-equity
\nintra-Group loans.
\nCash-flow hedging
\nThe Group uses forward foreign exchange contracts to hedge future foreign currency sales and
\npurchases. At 31 July 2023, contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) were
\ndesignated as hedging instruments. In addition, the Group had outstanding foreign currency
\ncontracts with a nominal value of \u00a3252m (FY2022: \u00a3226m) which were being used to manage
\ntransactional foreign exchange exposures, but were not accounted for as cash-flow hedges. The
\nfair value of the contracts is disclosed in note 20.
\nThe majority of hedged transactions will be recognised in the consolidated income statement in
\nthe same period that the cash-flows are expected to occur, with the only differences arising
\nbecause of normal commercial credit terms on sales and purchases. It is the Group\u2019s policy to
\nhedge 80% of certain exposures for the next two years and 50% of highly probable exposures for
\nthe next 12 months.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The foreign exchange forward contracts have similar
\ncritical terms to the hedged items, such as the notional amounts and maturities. Therefore, there
\nis an economic relationship and the hedge ratio is established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\nGroup\u2019s and the counterparty credit risks on the fair value of the foreign exchange forward
\ncontracts, which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs. Of the foreign exchange contracts designated
\nas hedging instruments, 98% are for periods of 12 months or less (FY2022: 98%).
\nThe following table presents a reconciliation by risk category of the cash-flow hedge reserve and
\nanalysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward cash-flow hedge reserve at start of year
(3)
2
\nForeign exchange forward contracts:
Net fair value gains on effective hedges
1
(6)
\nAmount reclassified to income statement
\n\u2013 finance costs
2
1
\nCarried forward cash-flow hedge reserve at end of year
\u2013
(3)
\nThe following tables set out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the cash-flow hedge reserve:
\nHedged item
Hedged exposure
Hedging instrument
\nFinancial
\nyear
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCash-flow hedge
\nreserve
\n\u00a3m
\nSales and
\npurchases
\nForeign
\ncurrency risk
\nForeign exchange
\ncontracts
\nFY2023
1
(1)
1
\nFY2022
(6)
6
(6)
\nCash-flow hedges generated \u00a3nil of ineffectiveness in FY2023 (FY2022: \u00a3nil) which was
\nrecognised in the income statement through finance costs.
\nTranslational currency exposure
\nThe Group has significant investments in overseas operations, particularly in the US and Europe.\u00a0As
\na result, the sterling value of the Group\u2019s balance sheet can be significantly affected by\u00a0movements
\nin exchange rates. The Group seeks to mitigate the effect of these translational currency exposures
\nby matching the net investment in overseas operations with borrowings denominated in their
\nfunctional currencies, except where significant adverse interest differentials or other factors would
\nrender the cost of such hedging activity uneconomic. This is achieved by borrowing primarily in the
\nrelevant currency or in some cases indirectly using cross-currency swaps.
\nNet investment hedges
\nThe table below sets out the currency of loans and swap contracts designated as net investment
\nhedges:
\nAt 31 July 2023
At 31 July 2022
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nLoans designated as net
\ninvestment hedges
\u2013
(293)
(293)
\u2013
(451)
(451)
\nCross-currency swap
(247)
\u2013
(247)
(615)
\u2013
(615)
\n(247)
(293)
(540)
(615)
(451)
(1,066)
\n
\n
\n
At 31 July 2023, cross-currency swaps hedged the Group\u2019s exposure to US dollars and euros
\n(31\u00a0July 2022: US dollars and euros). All the cross-currency swaps designated as net investment
\nhedges were non-current (FY2022: current and non-current). Swaps generating \u00a3247m of the US
\ndollar exposure (FY2022: \u00a3261m) will mature in February 2027.
\nIn addition, non-swapped borrowings were also used to hedge the Group\u2019s exposure to euros
\n(31\u00a0July 2022: US dollars and euros). Borrowings generating \u00a3293m of the euro exposure
\n(FY2022: \u00a3287m) will mature in February\u00a02027.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The swaps and borrowings have the same notional
\namount as the hedged items and, therefore, there is an economic relationship with the hedge
\nratio established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\ncounterparty and the Group\u2019s own credit risk on the fair value of the foreign exchange forward
\ncontracts which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs.
\nThe following table presents a reconciliation by risk category of the net investment hedge reserve
\nand analysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward net investment hedge reserve at start of year
(207)
(238)
\nCross-currency swaps *
Net fair value gains on effective hedges
40
(77)
\nBonds
Net fair value gains on effective hedges
(29)
5
\nAmounts removed from the hedge
\nreserve and recognised in the income
\nstatement
Profit/(loss) on business disposal
\u2013
103
\nCarried forward net investment hedge reserve at end of year
(196)
(207)
\n*
The FY2022 reported amount for net fair value losses on effective hedges of cross-currency swaps was incorrectly
\npresented as \u00a382m rather than \u00a377m. The total reserve balances and net assets for FY2022 are not impacted by the
\ncorrection to this table.
\nThe following table sets out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the net investment hedge reserve as
\nat 31 July 2022 and 31 July 2021:
\nHedged item
Hedged exposure
Hedging instrument
Financial year
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nNet investment
\nhedge\u00a0reserve
\n\u00a3m
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2023
(40)
40
40
\nBonds
FY2023
29
(29)
(29)
\n(11)
11
11
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2022
82
(82)
(82)
\nBonds
FY2022
(5)
5
5
\n77
(77)
(77)
\nNet investment hedges generated \u00a31m of ineffectiveness in FY2022 (FY2022: \u00a31m) which was
\nrecognised in the income statement through finance costs.
\nThe fair values of these net investment hedges are subject to exchange rate movements.
\nBased\u00a0on the hedging instruments in place at\u00a0the\u00a0year-end, if the specified currencies
\nwere\u00a0to\u00a0strengthen 10% while all other market rates remained constant, it would have the
\nfollowing effect:
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2023
\n\u00a3m
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2022
\n\u00a3m
\nUS dollar
27
68
\nEuro
33
50
\nThese movements would be fully offset by an opposite movement on the retranslation of the net
\nassets of the overseas subsidiaries. These sensitivities were calculated before adjusting for tax.
\n(B) INTEREST RATE RISK
\nThe Group operates an interest rate policy designed to optimise interest cost and reduce volatility
\nin reported earnings. The Group\u2019s current policy is to require interest rates to be fixed within a band
\nof between 40% and 60 % of the level of gross debt (excluding leases). This is achieved through fixed
\nrate borrowings and interest rate swaps. At 31 July 2023 54% (FY2022: 44%) of the Group\u2019s gross
\nborrowings (excluding leases) were at fixed interest rates, after adjusting for interest rate swaps
\nand the impact of short maturity derivatives designated as net investment hedges.
\nThe Group monitors its fixed rate risk profile against both gross and net debt. For medium-term
\nplanning, it focuses on gross debt to eliminate the fluctuations of variable cash levels over the
\ncycle. The weighted average interest rate on borrowings and cross-currency swaps at 31 July
\n2023, after interest rate swaps, was 4.53% (FY2022: 3.06%).
\n
\n
\n
Interest rate profile of financial assets and liabilities and the fair value of borrowings
\nThe following table shows the interest rate risk exposure of investments, cash and borrowings,
\nwith the borrowings adjusted for the impact of interest rate hedging. Other financial assets and
\nliabilities do not earn or bear interest, and for all financial instruments except borrowings, the
\ncarrying value is not materially different from their fair value.
\nAs at 31 July 2023
\nAt fair value
\nthrough
\nprofit or loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(29)
(29)
\nBetween one and five years
\u2013
\u2013
(365)
(347)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(418)
(400)
\nFloating rate interest financial assets/(liabilities)
4
215
(236)
(240)
\nTotal interest-bearing financial assets/(liabilities)
4
215
(654)
(640)
\nNon-interest-bearing assets in the same category
\u2013
70
\u2013
\u2013
\nTotal
4
285
(654)
(640)
\nAs at 31 July 2022
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(203)
(203)
\nBetween one and five years
\u2013
\u2013
(357)
(359)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(584)
(586)
\nFloating rate interest financial assets/(liabilities)*
4
970
(582)
(586)
\nTotal interest-bearing financial assets/(liabilities)
4
970
(1,166)
(1,172)
\nNon-interest-bearing assets in the same category
\u2013
86
\u2013
\u2013
\nTotal
4
1,056
(1,166)
(1,172)
\n*
Floating rate interest financial assets in the prior year have been amended to remove the investments in ICU Medical
\nInc., contingent consideration and investments in early-stage business that were incorrectly reported as having
\ninterest rate exposure.
\nInterest rate hedging
\nThe Group also has exposures to the fair values of non-derivative financial instruments such as
\nEUR fixed rate borrowings. To manage the risk of changes in these fair values, the Group has
\nentered into fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which
\nfor accounting purposes are designated as fair value hedges.
\nAt 31 July 2023 and 31 July 2022, the Group had designated the following hedges against
\nvariability in the fair value of borrowings arising from fluctuations in base rates:
\n\u2013
\u20ac300m of the fixed/floating and \u20ac exchange exposure of EUR/USD interest rate swaps
\nmaturing on 23 February 2027 partially hedging the \u20ac 2027 Eurobond; and
\n\u2013
\u20ac400m of the fixed/floating element of the EUR/USD interest rate swaps that partially hedged
\nthe \u20ac 2023 Eurobond was repaid on 28 April 2022.
\nThe fair values of the hedging instruments are disclosed in note 20. The effect of the swaps was to
\nconvert \u00a3257m (FY2022: \u00a3588m) debt from fixed rate to floating rate. The swaps have similar
\ncritical terms to the hedged items, such as the reference rate, reset dates, notional amounts,
\npayment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is
\nestablished as 1:1. Hedge effectiveness is determined at the inception of the hedge relationship,
\nand through periodic prospective effectiveness assessments to ensure that an economic
\nrelationship exists between the hedged item and hedging instrument.
\nThe main source of hedge ineffectiveness in these hedging relationships is the effect of the
\ncurrency basis risk on cross-currency interest rate swaps which are not reflected in the fair value
\nof the hedged item. No other sources of ineffectiveness emerged from these hedging
\nrelationships. Any hedge ineffectiveness was recognised immediately in the income statement in
\nthe period in which it occurred.
\n
\n
\n
The following table sets out the details of the hedged exposures covered by the Group\u2019s fair value hedges:
\nHedged item
Hedged exposure
Financial year
\nChanges in value
\nof hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCarrying amount
\nAccumulated fair value
\nadjustments on hedged item
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nFixed rate bonds (a)
\nInterest rate risk
FY2023
(2)
2
\u2013
\u2013
\u2013
\u2013
\nInterest rate & currency rate risk
FY2023
16
(16)
\u2013
233
\u2013
(21)
\n14
(14)
\u2013
233
\u2013
(21)
\nFixed rate bonds (a)
\nInterest rate risk
FY2022
8
(8)
\u2013
336
\u2013
(2)
\nInterest rate & currency rate risk
FY2022
21
(20)
\u2013
252
\u2013
(5)
\n29
(28)
\u2013
588
\u2013
(7)
\n(a) Classified as borrowings.
\nFair value hedges generated a \u00a3nil ineffectiveness in FY2023 (FY2022: \u00a31m) which was recognised
\nin the income statement through finance costs.
\nSensitivity of interest charges to interest rate movements
\nThe Group has exposure to sterling, US dollar and euro interest rates. However, the Group does
\nnot have a significant exposure to interest rate movements for any individual currency. Based on
\nthe composition of net debt and investments at 31 July 2023, and taking into consideration all fixed
\nrate borrowings and interest rate swaps in place, a one percentage point (100 basis points)
\nchange in average floating interest rates for all three currencies would have a \u00a32m impact
\n(FY2022: \u00a32m impact) on the Group\u2019s profit before tax.
\n(C) FINANCIAL CREDIT RISK
\nThe Group is exposed to credit-related losses in the event of non-performance by counterparties
\nto financial instruments, but does not currently expect any counterparties to fail to meet their
\nobligations. Credit risk is mitigated by the Board-approved policy of only placing cash deposits
\nwith highly rated relationship bank counterparties within counterparty limits established by
\nreference to their Standard & Poor\u2019s long-term debt rating. In the normal course of business, the
\nGroup operates cash pooling systems, where a legal right of set-off applies.
\nThe maximum credit risk exposure in the event of other parties failing to perform their obligations
\nunder financial assets, excluding trade and other receivables and derivatives, totals \u00a3295m at 31
\nJuly 2023 (FY2022: \u00a31,067m).
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash in AAA liquidity funds
78
551
\nCash at banks with at least a AA- credit rating
31
104
\nCash at banks with all other A credit ratings
170
397
\nCash at other banks
6
4
\nInvestments in bank deposits
4
4
\nOther investments
7
7
\n296
1,067
\nAt 31 July 2023, the maximum exposure with a single bank for deposits and cash was \u00a365m
\n(FY2022: \u00a3339m). The bank has a credit rating of A+. The maximum mark to market exposure with
\na single bank for derivatives was out of the money in both the current and prior year and does not
\nrepresent a credit risk.
\n
\n
\n
(D) LIQUIDITY RISK
\nBorrowing facilities
\nBoard policy specifies the maintenance of unused committed credit facilities of at least \u00a3300m at
\nall times to ensure that the Group has sufficient available funds for operations and planned
\ndevelopment. The\u00a0Group has Revolving Credit Facilities of US$800m maturing 5 May 2028. At\u00a0the
\nbalance sheet date, the Group had the following undrawn credit facilities:
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nExpiring after more than four years (FY 2022: two years)
622
657
\nCash deposits
\nAs at 31 July 2023, \u00a3110m (FY2022: \u00a3814m) of cash and cash equivalents was on deposit with
\nvarious banks of which \u00a378m (FY2022: \u00a3558m) was in liquidity funds. \u00a34m (FY2022: \u00a34m) of
\ninvestments comprised bank deposits held to secure liabilities and letters of credit.
\nGross contractual cash-flows for borrowings
\nAs at 31 July 2023
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(29)
\u2013
(11)
(40)
\nBetween one and two years
(27)
\u2013
(11)
(38)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(13)
\u2013
(11)
(24)
\nBetween four and five years
(561)
21
\u2013
(540)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(674)
21
(44)
(697)
\nAs at 31 July 2022
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(539)
2
(17)
(554)
\nBetween one and two years
(23)
\u2013
(11)
(34)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(14)
\u2013
(11)
(25)
\nBetween four and five years
(552)
5
(11)
(558)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(1,172)
7
(61)
(1,226)
\nThe figures presented in the borrowings column include the non-cash adjustments which are
\nhighlighted in the adjacent column. The contractual interest reported for borrowings is before the
\neffect of interest rate swaps.
\nGross contractual cash-flows for derivative financial instruments
\nAs at 31 July 2023
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
209
(204)
5
\nGreater than one year
6
(6)
\u2013
\nLiabilities
\nLess than one year
159
(161)
(2)
\nGreater than one year
252
(270)
(18)
\nTotal
626
(641)
(15)
\nAs at 31 July 2022
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
495
(521)
(26)
\nGreater than one year
270
(290)
(20)
\nLiabilities
\nLess than one year
212
(209)
3
\nGreater than one year
8
(8)
\u2013
\nTotal
985
(1,028)
(43)
\nThis table above presents the undiscounted future contractual cash-flows for all derivative
\nfinancial instruments. For this disclosure, cash-flows in foreign currencies are translated using
\nthe spot rates at the balance sheet date. The fair values of these financial instruments are
\npresented in note 20.
\nGross contractual cash-flows for other financial liabilities
\nThe contractual cash-flows for financial liabilities included in trade and other payables were
\n\u00a3463m (FY2022: \u00a3474m) due in less than one year, \u00a313m (FY2022: \u00a313m) due between one and
\nfive years.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBorrowingCostsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20194": {
"value": "5. EARNINGS PER SHARE Basic earnings per share are calculated by dividing the profit for the year attributable to equity
\nshareholders of the Company by the average number of ordinary shares in issue during the year.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nProfit attributable to equity shareholders for the year:
\n\u2013 continuing
225
11
\n\u2013 discontinued
6
1,022
\nTotal
231
1,033
\nAverage number of shares in issue during the year (note 24)
352,891,120
386,678,211
\nStatutory earnings per share total \u2013 basic
65.5p
267.1p
\nStatutory earnings per share total \u2013 diluted
65.1p
266.0p
\nStatutory earnings per share continuing operations \u2013 basic
63.8p
2.8p
\nStatutory earnings per share continuing operations \u2013 diluted
63.4p
2.8p
\nDiluted earnings per share are calculated by dividing the profit attributable to ordinary
\nshareholders by 354,681,819 (FY2022: 388,349,758) ordinary shares, being the average number
\nof\u00a0ordinary shares in issue during the year adjusted by the dilutive effect of employee share
\nschemes. No options (FY2022: nil) were excluded from this calculation because their effect
\nwas\u00a0anti-dilutive.
\nA reconciliation of statutory and headline earnings per share is as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\n\u00a3m
\nBasic EPS
\n(p)
\nDiluted EPS
\n(p)
\u00a3m
\nBasic EPS
\n(p)
\nDiluted EPS
\n(p)
\nTotal profit attributable to
\nequity shareholders of the
\nParent Company
231
65.5
65.1
1,033
267.1
266.0
\nExclude: Non-headline items
\n(note 3)
113
(714)
\nHeadline earnings per share
344
97.5
97.0
319
82.5
82.1
\nProfit from continuing
\noperations attributable to
\nequity shareholders of the
\nParent Company
225
63.8
63.4
11
2.8
2.8
\nExclude: Non-headline items
\n(note 3)
119
259
\nHeadline earnings per share \u2013
\ncontinuing operations
344
97.5
97.0
270
69.8
69.5",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20291": {
"value": "6. TAXATION This note only provides information about corporate income taxes under IFRS. Smiths companies
\noperate in over 50 countries across the world. They pay and collect many different taxes in
\naddition to corporate income taxes including: payroll taxes; value added and sales taxes; property
\ntaxes; product-specific taxes; and environmental taxes. The costs associated with these other
\ntaxes are included in profit before tax.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nThe taxation charge in the consolidated income statement for the year
\ncomprises:
\nContinuing operations
\n\u2013 current income tax charge
112
68
\n\u2013 current tax adjustments in respect of prior periods
(7)
5
\nCurrent taxation
105
73
\nDeferred taxation
29
17
\nTotal taxation expense \u2013 continuing operations
134
90
\nAnalysed as:
\nHeadline taxation expense
121
104
\nNon-headline taxation charge/(credit)
13
(14)
\nTotal taxation expense in the consolidated income statement
134
90
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nTax on items charged/(credited) to equity
\nDeferred tax:
\n\u2013 retirement benefit schemes
32
\u2013
\n\u2013 share-based payment
\u2013
(1)
\n32
(1)
\nThe \u00a332m (FY2022: \u00a3nil) charge to equity for retirement benefit schemes principally related to UK
\nretirement schemes.
\n
\n
CURRENT TAXATION LIABILITIES
\nCurrent tax
\n\u00a3m
\nAt 31 July 2021
(19)
\nForeign exchange loss
(4)
\nCharge to income statement
(73)
\nTax paid
79
\nAt 31 July 2022
(17)
\nComprising:
\nCurrent tax receivable
50
\nCurrent tax payable within one year
(64)
\nCorporation tax payable after more than one year
(3)
\nAt 31 July 2022
(17)
\nCharge to income statement
(105)
\nTax paid
92
\nAt 31 July 2023
(30)
\nComprising:
\nCurrent tax receivable
47
\nCurrent tax payable within one year
(74)
\nCorporation tax payable after more than one year
(3)
\nAt 31 July 2023
(30)
\nProvisions for tax liabilities amount to \u00a346m (FY2022: \u00a338m) the majority of which relates to the
\nrisk of challenge from tax authorities to the geographic allocation of profits across the Group.
\nIn addition to the risks provided for, the Group faces a variety of other tax risks, which result from
\noperating in a complex global environment, including the ongoing reform of both international and
\ndomestic tax rules, new and ongoing tax audits in the Group\u2019s larger markets and the challenge to
\nfulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of
\nthe Group\u2019s global operations.
\nThe Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24
\nmonths for which provisions are recognised based on best estimates and management\u2019s
\njudgements concerning the ultimate outcome of the audit. Due to the uncertainty associated with
\nsuch items, it is possible at a future date, on conclusion of open tax matters, the final outcome
\nmay vary significantly from the amounts noted above.
\nRECONCILIATION OF THE TAX CHARGE
\nThe headline tax charge for the year of \u00a3121m (FY2022: \u00a3104m) represents an effective rate of
\n26.0% (FY2022: 27.6%).
\nThe tax charge on the profit for the year for continuing operations is different from the standard
\nrate of corporation tax in the UK, with a rate for FY2023 of 21.0% (FY2022: 19.0%). The differences
\nare reconciled as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nProfit before taxation
366
103
\nNotional taxation expense at UK corporate rate of 21% (FY2022: 19.0%)
77
20
\nDifferent tax rates on non-UK profits and losses
13
13
\nNon-deductible expenses and other charges
24
11
\nTax credits and non-taxable income
(10)
(6)
\nNon-headline UK deferred tax asset recognition adjustment
31
5
\nOther adjustments to unrecognised deferred tax
2
10
\nNon-tax relievable loss on UK pensions schemes
\u2013
41
\nTax on Smiths Medical consolidation adjustments
\u2013
2
\nPrior year true-up
(3)
(6)
\nTotal taxation expense in the consolidated income statement
134
90
\nComprising:
\nTaxation on headline profit
121
104
\nNon-headline taxation items:
\n\u2013 Tax credit on non-headline loss
(18)
(19)
\n\u2013 UK deferred tax asset recognition adjustment
31
5
\nTaxation on non-headline items
13
(14)
\nTotal taxation expense in the consolidated income statement
134
90
\nThe table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual
\ntotal tax charge. As a group operating in multiple countries, the actual tax rates applicable to
\nprofits in those countries are different from the UK tax rate. The impact is shown above as
\ndifferent tax rates on non-UK profits and losses. The Group\u2019s worldwide business leads to the
\nconsideration of a number of important factors which may affect future tax charges, such as: the
\nlevels and mix of profitability in different jurisdictions; transfer pricing regulations; tax rates
\nimposed and tax regime reforms; acquisitions; disposals; restructuring activities; and
\nsettlements or agreements with tax authorities.
\n
\n
DEFERRED TAXATION ASSETS/(LIABILITIES)
\nProperty, plant,
\nequipment and
\nintangible
\nassets
\n\u00a3m
\nEmployment
\nbenefits
\n\u00a3m
\nLosses
\ncarried
\nforward
\n\u00a3m
\nProvisions
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nAt 31 July 2021
(56)
(105)
144
78
3
64
\nReallocations
(15)
1
9
1
4
\u2013
\nCharge to income statement \u2013
\ncontinuing operations
4
50
(54)
(10)
(7)
(17)
\nCredit to equity
\u2013
3
\u2013
\u2013
(4)
(1)
\nForeign exchange rate
\nmovements
(9)
\u2013
4
10
\u2013
5
\nAt 31 July 2022
(76)
(51)
103
79
(4)
51
\nComprising:
\nDeferred tax assets
(1)
(56)
76
65
11
95
\nDeferred tax liabilities
(75)
5
27
14
(15)
(44)
\nAt 31 July 2022
(76)
(51)
103
79
(4)
51
\nReallocations
\u2013
(2)
6
(4)
\u2013
\u2013
\nCharge to income statement \u2013
\ncontinuing operations
13
(3)
(32)
(5)
(2)
(29)
\nCredit to equity
\u2013
32
\u2013
\u2013
\u2013
32
\nForeign exchange rate
\nmovements
3
(1)
(2)
(4)
2
(2)
\nAt 31 July 2023
(60)
(25)
75
66
(4)
52
\nComprising:
\nDeferred tax assets
(2)
(27)
50
60
14
95
\nDeferred tax liabilities
(58)
2
25
6
(18)
(43)
\nAt 31 July 2023
(60)
(25)
75
66
(4)
52
\nOf the amounts included within \u2018Other\u2019, shown in the above table, as at 31 July 2023, amounts
\nrelating to tax on unremitted earnings were \u00a319m (FY2022: \u00a319m). The aggregate amount of
\ntemporary differences associated with investments in subsidiaries for which deferred tax
\nliabilities have not been recognised is immaterial.
\nThe deferred tax asset relating to losses has been recognised on the basis of strong evidence of
\nfuture taxable profits against which the unutilised tax losses can be relieved or it is probable that
\nthey will be recovered against the reversal of deferred tax liabilities. The closing net deferred tax
\nasset balance related to UK activities and included in the balance at 31 July 2023 amounted to \u00a3nil
\n(FY2022: \u00a3nil). The deferred tax asset balance for provisions includes \u00a351m (FY2022: \u00a357m)
\nrelating to John Crane Inc. litigation provision, and \u00a39m (FY2022: \u00a312m) relating to Titeflex
\nCorporation. See note 23 for additional information on provisions.
\nUNRECOGNISED DEFERRED TAX
\nThe Group has \u00a3521m of unrecognised deferred tax relating to losses (FY2022: \u00a3335m).
\nThe expiry date of operating losses carried forward is dependent upon the law of the various
\nterritories in which the losses arise. A summary of expiry dates in respect of which deferred tax
\nhas not been recognised is set out below:
\n2023
\n\u00a3m
\nExpiry of
\nlosses
\n2022
\n\u00a3m
\nExpiry of
\nlosses
\nUnrestricted losses \u2013 operating losses
521
No expiry
335
No expiry
\nTotal unrecognised deferred tax on losses
521
335
\nUnrecognised deferred tax relating to losses has increased by \u00a3186m (FY2022: \u00a3228m). This
\ncomprises an increase of \u00a378m that principally matches the reduction in the UK pensions
\ndeferred tax liability, an increase of \u00a375m relating to Detection and Interconnect USA current year
\nlosses and \u00a333m from a FY2022 change in local accounting method for tax purposes resulting in
\nadditional losses being booked in FY2023.
\nDEVELOPMENTS IN THE GROUP TAX POSITION
\nIn December 2021, the Organisation for Economic Co-operation and Development published
\nrules\u00a0relating to global minimum taxation called \u2018Pillar 2 rules\u2019, currently timetabled to apply
\nin\u00a0the UK to accounting periods beginning on or after 1 January 2024 (year ended 31 July 2025
\nfor\u00a0Smiths). The Group will continue to monitor the development and future implementation of
\nthese rules globally.
\nSmiths is actively working to fully understand the impact of the new rules and developing
\nprocesses to enable compliance. Based upon our latest understanding, the current estimate of
\nadditional tax payable is not expected to have a material impact on the Group.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20378": {
"value": "CURRENT TAXATION LIABILITIES Current tax
\n\u00a3m
\nAt 31 July 2021
(19)
\nForeign exchange loss
(4)
\nCharge to income statement
(73)
\nTax paid
79
\nAt 31 July 2022
(17)
\nComprising:
\nCurrent tax receivable
50
\nCurrent tax payable within one year
(64)
\nCorporation tax payable after more than one year
(3)
\nAt 31 July 2022
(17)
\nCharge to income statement
(105)
\nTax paid
92
\nAt 31 July 2023
(30)
\nComprising:
\nCurrent tax receivable
47
\nCurrent tax payable within one year
(74)
\nCorporation tax payable after more than one year
(3)
\nAt 31 July 2023
(30)
\nProvisions for tax liabilities amount to \u00a346m (FY2022: \u00a338m) the majority of which relates to the
\nrisk of challenge from tax authorities to the geographic allocation of profits across the Group.
\nIn addition to the risks provided for, the Group faces a variety of other tax risks, which result from
\noperating in a complex global environment, including the ongoing reform of both international and
\ndomestic tax rules, new and ongoing tax audits in the Group\u2019s larger markets and the challenge to
\nfulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of
\nthe Group\u2019s global operations.
\nThe Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24
\nmonths for which provisions are recognised based on best estimates and management\u2019s
\njudgements concerning the ultimate outcome of the audit. Due to the uncertainty associated with
\nsuch items, it is possible at a future date, on conclusion of open tax matters, the final outcome
\nmay vary significantly from the amounts noted above.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20527": {
"value": "DEFERRED TAXATION ASSETS/(LIABILITIES) Property, plant,
\nequipment and
\nintangible
\nassets
\n\u00a3m
\nEmployment
\nbenefits
\n\u00a3m
\nLosses
\ncarried
\nforward
\n\u00a3m
\nProvisions
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nAt 31 July 2021
(56)
(105)
144
78
3
64
\nReallocations
(15)
1
9
1
4
\u2013
\nCharge to income statement \u2013
\ncontinuing operations
4
50
(54)
(10)
(7)
(17)
\nCredit to equity
\u2013
3
\u2013
\u2013
(4)
(1)
\nForeign exchange rate
\nmovements
(9)
\u2013
4
10
\u2013
5
\nAt 31 July 2022
(76)
(51)
103
79
(4)
51
\nComprising:
\nDeferred tax assets
(1)
(56)
76
65
11
95
\nDeferred tax liabilities
(75)
5
27
14
(15)
(44)
\nAt 31 July 2022
(76)
(51)
103
79
(4)
51
\nReallocations
\u2013
(2)
6
(4)
\u2013
\u2013
\nCharge to income statement \u2013
\ncontinuing operations
13
(3)
(32)
(5)
(2)
(29)
\nCredit to equity
\u2013
32
\u2013
\u2013
\u2013
32
\nForeign exchange rate
\nmovements
3
(1)
(2)
(4)
2
(2)
\nAt 31 July 2023
(60)
(25)
75
66
(4)
52
\nComprising:
\nDeferred tax assets
(2)
(27)
50
60
14
95
\nDeferred tax liabilities
(58)
2
25
6
(18)
(43)
\nAt 31 July 2023
(60)
(25)
75
66
(4)
52
\nOf the amounts included within \u2018Other\u2019, shown in the above table, as at 31 July 2023, amounts
\nrelating to tax on unremitted earnings were \u00a319m (FY2022: \u00a319m). The aggregate amount of
\ntemporary differences associated with investments in subsidiaries for which deferred tax
\nliabilities have not been recognised is immaterial.
\nThe deferred tax asset relating to losses has been recognised on the basis of strong evidence of
\nfuture taxable profits against which the unutilised tax losses can be relieved or it is probable that
\nthey will be recovered against the reversal of deferred tax liabilities. The closing net deferred tax
\nasset balance related to UK activities and included in the balance at 31 July 2023 amounted to \u00a3nil
\n(FY2022: \u00a3nil). The deferred tax asset balance for provisions includes \u00a351m (FY2022: \u00a357m)
\nrelating to John Crane Inc. litigation provision, and \u00a39m (FY2022: \u00a312m) relating to Titeflex
\nCorporation. See note 23 for additional information on provisions.
\nUNRECOGNISED DEFERRED TAX
\nThe Group has \u00a3521m of unrecognised deferred tax relating to losses (FY2022: \u00a3335m).
\nThe expiry date of operating losses carried forward is dependent upon the law of the various
\nterritories in which the losses arise. A summary of expiry dates in respect of which deferred tax
\nhas not been recognised is set out below:
\n2023
\n\u00a3m
\nExpiry of
\nlosses
\n2022
\n\u00a3m
\nExpiry of
\nlosses
\nUnrestricted losses \u2013 operating losses
521
No expiry
335
No expiry
\nTotal unrecognised deferred tax on losses
521
335
\nUnrecognised deferred tax relating to losses has increased by \u00a3186m (FY2022: \u00a3228m). This
\ncomprises an increase of \u00a378m that principally matches the reduction in the UK pensions
\ndeferred tax liability, an increase of \u00a375m relating to Detection and Interconnect USA current year
\nlosses and \u00a333m from a FY2022 change in local accounting method for tax purposes resulting in
\nadditional losses being booked in FY2023.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20721": {
"value": "7. EMPLOYEES Year ended 31 July 2023
Year ended 31 July 2022
\nContinuing
\noperations
\n\u00a3m
\nDiscontinued
\noperations
\n\u00a3m
\nTotal
\n\u00a3m
\nContinuing
\noperations
\n\u00a3m
\nDiscontinued
\noperations
\n\u00a3m
\nTotal
\n\u00a3m
\nStaff costs during the period
\nWages and salaries
802
\u2013
802
700
91
791
\nSocial security
92
\u2013
92
81
9
90
\nShare-based payment (note 9)
14
\u2013
14
13
2
15
\nPension costs (including defined
\ncontribution schemes) (note 8)
31
\u2013
31
29
5
34
\n939
\u2013
939
823
107
930
\n
\n
The average number of persons employed, including employees on permanent, fixed term and
\ntemporary contracts, rounded to the nearest 50 employees was:
\nYear ended
\n31 July 2023
\nYear ended
\n31 July 2022
\nJohn Crane
6,050
6,050
\nSmiths Detection
3,250
3,100
\nFlex-Tek
3,750
3,300
\nSmiths Interconnect
2,800
2,500
\nCorporate (including central/shared IT services)
300
300
\nContinuing operations
16,150
15,250
\nDiscontinued operations \u2013 Smiths Medical (in period to 6 January 2022)
\u2013
6,700
\nTotal
16,150
21,950",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20836": {
"value": "KEY MANAGEMENT The key management of the Group comprises Smiths Group plc Board Directors and Executive
\nCommittee members. Their aggregate compensation is shown below. Details of Directors\u2019
\nremuneration are contained in the report of the Remuneration & People Committee on pages 98
\nto 110.
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nKey management compensation
\nSalaries and short-term employee benefits
12.0
10.3
\nCost of retirement benefits
0.7
0.7
\nCost of share-based incentive plans
4.9
4.7
\nNo member of key management had any material interest during the period in a contract of
\nsignificance (other than a service contract or\u00a0a\u00a0qualifying third-party indemnity provision) with the
\nCompany or any of its subsidiaries.
\nOptions and awards held at the end of the period by key management in respect of the Company\u2019s
\nshare-based incentive plans were:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nNumber of
\ninstruments
\n\u2019000
\nWeighted
\naverage
\nexercise
\nprice
\nNumber of
\ninstruments
\n\u2019000
\nWeighted
\naverage
\nexercise
\nprice
\nLTIP
1,580
1,411
\nRestricted stock
\u2013
8
\nSAYE
16
\u00a311.45
16
\u00a311.43",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20892": {
"value": "RELATED PARTY TRANSACTIONS The only related party transactions in FY2023 were key management compensation
\n(FY2022: key management compensation).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f20898": {
"value": "8. RETIREMENT BENEFITS Smiths provides retirement benefits to employees in a number of countries. This includes defined
\nbenefit and defined contribution plans and, mainly in the United Kingdom (UK) and United States
\nof America (US), post-retirement healthcare.
\nDEFINED CONTRIBUTION PLANS
\nThe Group operates defined contribution plans across many countries. In the UK a defined
\ncontribution plan has been offered since the closure of the UK defined benefit pension plans. In
\nthe US a 401(k) defined contribution plan operates. The total expense recognised in the
\nconsolidated income statement in respect of all these plans was \u00a331m (FY2022: \u00a334m).
\nDEFINED BENEFIT AND POST-RETIREMENT HEALTHCARE PLANS
\nThe principal defined benefit pension plans are in the UK and in the US and these have been
\nclosed so that no future benefits are accrued.
\nFor all schemes, pension costs are assessed in accordance with the advice of independent,
\nprofessionally qualified actuaries. These valuations have been updated by independent qualified
\nactuaries in order to assess the liabilities of the schemes as at 31 July 2023. Contributions to the
\nschemes are made on the advice of the actuaries, in accordance with local funding requirements.
\nThe changes in the present value of the net pension asset in the period were:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nAt beginning of period
194
413
\nForeign exchange rate movements
1
\u2013
\nCurrent service cost
(2)
(2)
\nHeadline scheme administration costs
(4)
(4)
\nNon-headline scheme administration costs
(2)
\nPast service cost, curtailments, settlements \u2013 continuing operations
4
(214)
\nSettlements \u2013 discontinued operations
\u2013
(3)
\nFinance income \u2013 retirement benefits
7
7
\nContributions by employer
5
9
\nActuarial (losses)/gains
(114)
3
\nRetirement benefit obligations disposed of with Smiths Medical
\u2013
5
\nUnrecognised assets due to surplus restriction
\u2013
(20)
\nNet retirement benefit asset
89
194
\nThe \u00a3413m net retirement benefit asset at the start of FY2022 included \u00a35m of pension obligations
\ndisclosed within liabilities held for sale.
\n
\n
UK PENSION SCHEMES
\nSmiths Group\u2019s funded UK pension schemes are subject to a statutory funding objective, as set
\nout in UK pension legislation. Scheme trustees need to obtain regular actuarial valuations to
\nassess the scheme against this funding objective. The trustees and sponsoring companies need
\nto agree funding plans to improve the position of a scheme when it is below the acceptable
\nfunding level.
\nThe UK Pensions Regulator has extensive powers to protect the benefits of members, promote
\ngood administration and reduce the risk\u00a0of situations arising which may require compensation
\nto\u00a0be paid from the Pension Protection Fund. These include imposing\u00a0a schedule of contributions
\nor the calculation of the technical provisions, where a trustee and company fail to agree
\nappropriate calculations.
\nSmiths Industries Pension Scheme (SIPS)
\nThis scheme was closed to future accrual effective 1 November 2009. SIPS provides index-linked
\n(to applicable caps) pension benefits based on final earnings at date of closure. SIPS is governed
\nby a corporate trustee (S.I. Pension Trustees Limited, a wholly owned subsidiary of Smiths Group
\nplc). The board of trustee directors currently comprises four Company-nominated trustees and
\nfour member-nominated trustees, with an independent chairman selected by Smiths Group plc.
\nTrustee directors are responsible for the management, administration, funding and investment
\nstrategy of the scheme.
\nThe most recent actuarial valuation of this scheme has been performed using the Projected Unit
\nMethod as at 31 March 2020. The valuation showed a surplus of \u00a334m on the Technical Provisions
\nfunding basis at the valuation date and the funding position has improved since then. As part of
\nthe valuation agreement, no contributions are currently being paid to SIPS and the Group\u2019s
\ncurrent expectation is that these contributions will not recommence (although there are
\ncircumstances relating to the Scheme\u2019s funding level in which contributions could be due to
\nSIPS). The next actuarial valuation, due as at 31 March 2023, is currently in progress, with the
\nresults expected later in 2023.
\nThe duration of SIPS liabilities is around 18 years (FY2022: 20 years) for active deferred members,
\n19 years (FY2022: 20 years) for deferred members and 10 years (FY2022: 11 years) for pensioners
\nand dependants. Durations have reduced primarily due to the increase in discount rate
\nassumption, which reduces the average time it takes to receive all future pension payments when
\nweighted by the present value of those future pension payments.
\nUnder the governing documentation of SIPS, any future surplus would be returnable to
\nSmiths\u00a0Group plc by refund, assuming gradual settlement of the liabilities over the lifetime
\nof\u00a0the\u00a0scheme.
\nIn SIPS, as part of ongoing data cleansing work being undertaken to prepare the scheme for a
\npotential full buy-out in the future, a wider review is being carried out to determine if the method
\nused in the early 1990s to equalise retirement ages between men and women was implemented
\ncorrectly. In FY2022, an additional liability of \u00a319m was recognised as a past service cost to reflect
\nthe expected impact of correcting this issue for certain sections of the scheme. In the current
\nyear, a further liability of \u00a312m has been recognised and \u00a316m recognised in previous years has
\nbeen released following the identification of additional evidence of the obligation for equalisation,
\nresulting in a net credit to the income statement of \u00a34m. The review remains ongoing however, no
\nfurther material additional liabilities are expected.
\nSIPS uses a Liability Driven Investment (LDI) strategy to hedge against interest and inflation rate
\nchanges. During the significant volatility that followed the UK Government\u2019s mini budget in
\nSeptember 2022, this hedging policy meant that SIPS asset values fell, as did the value of its
\nobligations. All of SIPS\u2019s collateral requirements in respect of the LDI assets were met, with no
\nsupport required from the Group.
\nTI Group Pension Scheme (TIGPS)
\nThis scheme was closed to future accrual effective 1 November 2009. TIGPS provides index-
\nlinked (to applicable caps) pension benefits based on final earnings at the date of closure. TIGPS
\nis governed by a corporate trustee (TI Pension Trustee Limited, an independent company). The
\nboard of trustee directors comprises four Company-nominated trustees and four member-
\nnominated trustees, with an independent trustee director selected by the trustee. The trustee is
\nresponsible for the management, administration, funding and investment strategy of the scheme.
\nIn June 2022 the TIGPS trustee completed a deal to secure its remaining uninsured pension
\nliabilities, by way of a bulk annuity buy-in with Rothesay Life plc. This means all of the scheme\u2019s
\nliabilities are insured via seven buy-in policies. The final buy-in has been secured with an intention
\nto fully buy-out the Scheme as soon as reasonably practical and within a period of four years. The
\nFY2022 income statement recognised a settlement loss of \u00a3171m in relation to the buy-in.
\nIn terms agreed between the Group and the TIGPS trustee prior to the transaction, when TIGPS
\nconverts all of its buy-in policies to buy-out policies and subsequently winds up, the trustee is
\nexpected to use any surplus remaining, after the costs of buying-out and winding up the scheme
\nhave been met, to improve member benefits. The FY 2022 income statement recognised a past
\nservice cost of \u00a324m in relation to the derecognition of the remaining surplus. The Group has no
\nexpectation of receiving a refund from the scheme and has placed an economic benefit value of
\nzero on the TIGPS surplus from 10 June 2022.
\nAs TIGPS currently retains the legal obligation to pay all scheme benefits, TIGPS liabilities remain
\npart of the retirement benefit obligations on the balance sheet alongside the corresponding
\nbuy-in assets. These liabilities and assets will be derecognised at the point the buy-in policies are
\nconverted to buy-outs and the legal obligation for payment of benefits is transferred to the
\nrelevant insurers.
\nThe most recent actuarial valuation of this scheme has been performed using the Projected Unit
\nMethod as at 5 April 2020. The valuation showed a surplus of \u00a322m on the Technical Provisions
\nfunding basis at the valuation date and the funding position has improved since then. Given
\nTIGPS\u2019s circumstances, the Group\u2019s current expectation is that no further contributions to TIGPS
\nwill be required. The next actuarial valuation, due as at 5 April 2023, is currently in progress, with
\nthe results expected later in 2023.
\nThe duration of the TIGPS liabilities is around 20 years (FY2022: 21 years) for active deferred
\nmembers, 18 years (FY2022: 19 years) for deferred members and 10 years (FY2022: 10 years) for
\npensioners and dependants.
\n
\n
US PENSION PLANS
\nThe valuations of the principal US pension and post-retirement healthcare plans were performed
\nusing census data at 1 January 2023.
\nThe pension plans were closed with effect from 30 April 2009 and benefits were calculated as
\nat\u00a0that date and are not revalued. Governance of the US pension plans is overseen by a Settlor
\nCommittee appointed by Smiths Group Services Corp, a wholly owned subsidiary of the Group.
\nThe duration of the liabilities for the largest US plan is around 15 years (FY2022: 16 years) for
\nactive deferred members, 14 years (FY2022: 15 years) for deferred members and 10 years
\n(FY2022: 10 years) for pensioners and dependants.
\nRISK MANAGEMENT
\nIn respect of uninsured liabilities, the pensions schemes are exposed to risks that:
\n\u2013
Investment returns are below expectations, leaving the schemes with insufficient assets in
\nfuture to pay all their pension obligations;
\n\u2013
Members and dependants live longer than expected, increasing the value of the pensions which
\nthe schemes have to pay;
\n\u2013
Inflation rates are higher than expected, causing amounts payable under index-linked pensions
\nto be higher than expected; and
\n\u2013
Increased contributions are required to meet funding targets if lower interest rates increase
\nthe current value of\u00a0liabilities.
\nThese risks are managed separately for each pension scheme. However, the Group has adopted a
\ncommon approach of closing defined benefit schemes to cap members\u2019 entitlements and of
\nsupporting trustees in adopting investment strategies which aim to hedge the value of assets
\nagainst changes in the value of liabilities caused by changes in interest and inflation rates.
\nAcross SIPS and TIGPS, approximately 60% of all liabilities are now de-risked through 11
\nbulk\u00a0annuities.
\nTIGPS
\nTIGPS has covered roughly 100% of liabilities with matching annuities, eliminating investment
\nreturn, longevity, inflation and funding risks in respect of those liabilities.
\nSIPS
\nSIPS has covered roughly 33% of liabilities with matching annuities, eliminating investment
\nreturn, longevity, inflation and funding risks in respect of those liabilities. It has also adopted a
\nLDI strategy to hedge interest and inflation risks of the scheme\u2019s uninsured liabilities by
\ninvestment in gilts together with the use of gilt repurchase arrangements, total return swaps,
\ninflation swaps and interest rate swaps. The strategy also takes into account the scheme\u2019s
\ncorporate bond investments.
\nThe critical estimates and principal assumptions used in updating the valuations are set
\nout\u00a0below:
\n2023
\nUK
\n2023
\nUS
\n2023
\nOther
\n2022
\nUK
\n2022
\nUS
\n2022
\nOther
\nRate of increase in salaries
n/a
n/a
2.5%
n/a
n/a
2.2%
\nRate of increase for active deferred
\nmembers
4.0%
n/a
n/a
4.0%
n/a
n/a
\nRate of increase in pensions in payment
3.3%
n/a
1.6%
3.4%
n/a
1.2%
\nRate of increase in deferred pensions
3.3%
n/a
n/a
3.4%
n/a
n/a
\nDiscount rate
5.1%
5.2%
2.8%
3.5%
4.5%
1.1%
\nInflation rate
3.3%
n/a
0.4%
3.4%
n/a
1.3%
\nThe assumptions used in calculating the costs and obligations of the Group\u2019s defined benefit
\npension plans are set by the Group after consultation with independent professionally qualified
\nactuaries. The assumptions used are estimates chosen from a range of possible actuarial
\nassumptions which, due to the timescale covered, may not necessarily occur in practice. For
\ncountries outside the UK and USA, assumptions are disclosed as a weighted average.
\nInflation rate assumptions
\nThe RPI inflation assumption of 3.3% has been derived using the Aon UK Government Gilt Prices
\nOnly Curve with an Inflation Risk Premium of 0.2% p.a.
\nThe Government\u2019s response to its consultation on RPI reform was published on 25 November
\n2020, and strongly implied that RPI will become aligned with CPI-H from 2030. No specific
\nallowance (beyond anything already priced into markets) has been factored into the RPI
\nassumptions for potential changes. The assumption for the long-term gap between RPI and CPI is
\n0.5% p.a. (FY2022:\u00a00.6%) reflecting the Group\u2019s view on the market pricing of this gap over the
\nlifetime of the UK schemes\u2019 liabilities, i.e., 0.9% p.a. (FY2022: 1.0%) pre-2030 and 0.1% p.a.
\npost-2030 (FY2022: 0.2%).
\nShort-term inflation has continued at rates higher than the Government\u2019s targets, though future
\ninflation is expected to fall in the short term as the Bank of England increases interest rates to
\ncombat high inflation. Consequently, the long-term inflation assumptions are similar to the prior
\nyear. The full impact of current high inflation is mitigated to an extent by the caps in place on
\nindex-linked increases. The Board considered and declined a request from the Trustee of SIPS to
\nrecommend an additional discretionary increase to pensions in payment. However, there is no
\nchange in the Group\u2019s constructive obligations and allowance for certain discretionary increases
\nin future continues to be included in the defined benefit obligations shown below.
\n
\n
Discount rate assumptions
\nThe UK schemes use a discount rate based on the annualised yield on the Aon GBP Single Agency
\nSelect AA Curve, using the expected cash-flows from a notional scheme with obligations of the
\nsame duration as that of the UK schemes, whereas in previous years the Aon GBP Select AA
\nCurve was used. The increase in the discount rate assumption at 31 July 2023 arises from market
\nconditions and is not impacted by the change in discount rate methodology.
\nThe US Plan uses a discount rate based on the annualised yield derived from Willis Towers
\nWatson\u2019s RATE:Link (10th \u2013 90th) model using the Plan\u2019s expected cash-flows.
\nThe discount rate assumptions have increased significantly since the prior year, largely due to
\nthe\u00a0significant volatility that followed the UK Government\u2019s mini budget in September 2022,
\nthough other factors have contributed to the continued rise in bond yields since then, including
\nheightened political uncertainty, increases to interest rates to combat persistent high inflation
\nand market illiquidity. A\u00a0higher discount rate has led to a lower value being placed on the
\nretirement benefit obligations, though there has also been a corresponding reduction in the
\nvalue\u00a0of assets.
\nMortality assumptions
\nThe mortality assumptions used in the principal UK schemes are based on the latest \u2018SAPS S3\u2019
\nbirth year tables with relevant scaling factors based on the recent experience of the schemes.
\nThe assumption allows for future improvements in life expectancy in line with the 2021 latest
\n2022 CMI projections, with a smoothing factor of 7.0 and \u2018A\u2019 parameter of 0.5%/0.25% (SIPS/
\nTIGPS) and blended to a long-term rate of 1.25%. The latest CMI projections incorporate
\nallowance for the impact of COVID-19, equivalent to a reduction in life expectancy of around
\n0.5\u00a0years.
\nThe mortality assumptions used in the principal US schemes are based on generational mortality
\nusing the latest Pri-2012 sex-distinct, employee/non-disabled annuitant table, with a 2012 base
\nyear, projected forward generationally with the latest MP-2021 mortality scale. No explicit
\nadjustment has been made to mortality assumptions in respect of COVID-19. The impact of
\nCOVID-19 remains uncertain and further data studies are underway to better predict the impact
\non future mortality.
\nExpected further years of life
\nUK schemes
\nMale
\n31 July 2023
\nFemale
\n31 July 2023
\nMale
\n31 July 2022
\nFemale
\n31 July 2022
\nMember who retires next year at age 65
21
23
22
24
\nMember, currently 45, when they retire in 20 years\u2019 time
20
24
23
25
\nExpected further years of life
\nUS schemes
\nMale
\n31 July 2023
\nFemale
\n31 July 2023
\nMale
\n31 July 2022
\nFemale
\n31 July 2022
\nMember who retires next year at age 65
21
22
21
22
\nMember, currently 45, when they retire in 20 years\u2019 time
22
24
22
24
\nSENSITIVITY
\nSensitivities in respect of the key assumptions used to measure the principal pension schemes as
\nat 31 July 2023 are set out below. These sensitivities show the hypothetical impact of a change in
\neach of the listed assumptions in isolation, with the exception of the sensitivity to inflation which
\nincorporates the impact of certain correlating assumptions. In practice, such assumptions rarely
\nchange in\u00a0isolation.
\nProfit before
\ntax
\nfor year
\nended
\n31 July 2023
\n\u00a3m
\nIncrease/
\n(decrease) in
\nscheme
\nassets
\n31 July 2023
\n\u00a3m
\n(Increase)/
\ndecrease in
\nscheme
\nliabilities
\n31 July 2023
\n\u00a3m
\nProfit before
\ntax
\nfor year
\nended
\n31 July 2022
\n\u00a3m
\nIncrease/
\n(decrease) in
\nscheme
\nassets
\n31 July 2022
\n\u00a3m
\n(Increase)/
\ndecrease in
\nscheme
\nliabilities
\n31 July 2022
\n\u00a3m
\nRate of mortality \u2013 one year
\nincrease in life expectancy
(2)
60
(88)
(2)
84
(135)
\nRate of mortality \u2013 one year
\ndecrease in life expectancy
2
(62)
89
2
(84)
136
\nRate of inflation \u2013 0.25% increase
(1)
23
(43)
(1)
34
(69)
\nDiscount rate \u2013 0.25% increase
2
(36)
60
2
(49)
97
\nMarket value of scheme assets \u2013
\n2.5% increase
2
30
\u2013
1
40
\u2013
\nThe effect on profit before tax reflects the impact of current service cost and net interest cost.
\nThe value of the scheme assets is affected by\u00a0changes in mortality rates, inflation and discounting
\nbecause they affect the carrying value of the insurance assets.
\nAsset valuation
\nThe pension schemes hold assets in a variety of pooled funds, in which the underlying assets
\ntypically are invested in credit and cash assets. These funds are valued. The price of the funds is
\nset by administrators/custodians employed by the investment managers and based on the value
\nof the underlying assets held in the funds. Prices are generally updated daily, weekly or quarterly
\ndepending upon the frequency of the fund\u2019s dealing.
\nBonds are valued using observable broker quotes. Gilt repurchase obligations are valued by
\nthe\u00a0relevant manager, which derives the value using an industry recognised model with
\nobservable inputs.
\nTotal return, interest and inflation swaps and forward FX contracts are bilateral agreements
\nbetween counterparties and do not have observable market prices. These derivative contracts
\nare valued using observable inputs.
\nInsured liabilities comprise annuity policies that match all or part of the scheme obligation to
\nidentified groups of members. These assets are valued by an external qualified actuary at the
\nactuarial valuation of the corresponding liability, reflecting this matching relationship.
\nThe insurance policies are treated as qualifying insurance policies as none of the insurers are
\nrelated parties of Smiths Group, and the proceeds of the policies can only be used to pay or fund
\nemployee benefits for the respective schemes, are not available to Smiths Group\u2019s creditors and
\ncannot be paid to Smiths Group.
\n
\n
Retirement benefit plan assets
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nCash and cash equivalents
93
1
1
95
\nPooled funds:
\n\u2013 Pooled equity
\u2013
\u2013
3
3
\n\u2013 Pooled Diversified Growth
\u2013
\u2013
13
13
\n\u2013 Pooled credit
320
\u2013
\u2013
320
\nCorporate bonds
203
141
\u2013
344
\nGovernment bonds/LDI
421
44
3
468
\nInsured liabilities
1,323
\u2013
\u2013
1,323
\nProperty
7
\u2013
\u2013
7
\nTotal market value
2,367
186
20
2,573
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nCash and cash equivalents
90
1
1
92
\nPooled funds:
\n\u2013 Pooled equity
\u2013
\u2013
3
3
\n\u2013 Pooled Diversified Growth
\u2013
\u2013
15
15
\n\u2013 Pooled credit
379
\u2013
\u2013
379
\nCorporate bonds
412
167
\u2013
579
\nGovernment bonds/LDI
498
57
3
558
\nInsured liabilities
1,649
\u2013
\u2013
1,649
\nProperty
39
\u2013
\u2013
39
\nTotal market value
3,067
225
22
3,314
\nThe UK Government bonds/LDI portfolios contain \u00a3717m (FY2022: \u00a3960m) of UK Government
\nbonds (gilts), \u00a3276m (FY2022: \u00a3476m) of gilt repurchase obligations and \u00a318m of interest and
\ninflation swap obligations (FY2022: \u00a39m assets) and forward FX contracts with a net obligation
\nof\u00a0\u00a32m (FY2022: \u00a35m asset). These are held to hedge against foreign currency risk. The pooled
\nfunds, insured liabilities and property assets are unquoted. The scheme assets do not include any
\nproperty occupied by, or other assets used by, the Group.
\nThe asset valuations are effective as at the end of the period, consistent with the calculations
\ndetermining the obligations, except for a small legacy commercial property investment which is
\ndue to be sold down over 2023. This investment is only valued at the end of each calendar quarter,
\nso no valuation is available as at the period end. The Group considers taking the most recent
\navailable valuation to be appropriate given the size of the commercial property investment relative
\nto the overall value of invested assets and wider commercial property market returns since the
\nmost recent valuation.
\nThe Group acknowledges that responsibility for the effective management of the schemes\u2019
\nassets\u00a0lies primarily with the trustees, but also accepts that any risks inherent in the investment
\nstrategy, including ESG and climate risk, are ultimately underwritten by the Group. Consequently,
\nthe Group ensures that the trustees\u2019 investment strategy and statements of investment principles
\nare compatible with the Group\u2019s wider sustainability strategy. For TIGPS, where all benefits are
\nnow secured by way of annuity purchase, all investment risks including ESG and climate risk,
\nhave effectively now been eliminated. For SIPS, a significant portion of investment risks have
\nalready been eliminated through annuity purchase and the scheme\u2019s time horizon to full buy-in,
\nhence exposure to investment risks including ESG and climate risk, continues to reduce.
\nPresent value of funded scheme liabilities and assets for the main UK and US schemes
\n31 July 2023 \u2013 \u00a3m
\nSIPS
TIGPS
\nUS
\nschemes
\nPresent value of funded scheme liabilities:
\n\u2013 Active deferred members
(25)
(18)
(31)
\n\u2013 Deferred members
(388)
(326)
(86)
\n\u2013 Pensioners
(838)
(561)
(85)
\nPresent value of funded scheme liabilities
(1,251)
(905)
(202)
\nMarket value of scheme assets
1,446
921
186
\nSurplus restriction
\u2013
(16)
\u2013
\nSurplus/(deficit)
195
\u2013
(16)
\n31 July 2022 \u2013 \u00a3m
\nSIPS
TIGPS
\nUS
\nschemes
\nPresent value of funded scheme liabilities:
\n\u2013 Active deferred members
(32)
(23)
(41)
\n\u2013 Deferred members
(561)
(442)
(109)
\n\u2013 Pensioners
(1,010)
(670)
(88)
\nPresent value of funded scheme liabilities
(1,603)
(1,135)
(238)
\nMarket value of scheme assets
1,912
1,155
225
\nSurplus restriction
\u2013
(20)
\u2013
\nSurplus/(deficit)
309
\u2013
(13)
\n
\n
Net retirement benefit obligations
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nMarket value of scheme assets
2,367
186
20
2,573
\nPresent value of funded scheme liabilities
(2,156)
(202)
(25)
(2,383)
\nSurplus restriction
(16)
\u2013
\u2013
(16)
\nSurplus/(deficit)
195
(16)
(5)
174
\nUnfunded pension plans
(37)
(6)
(36)
(79)
\nPost-retirement healthcare
(3)
(1)
(2)
(6)
\nPresent value of unfunded obligations
(40)
(7)
(38)
(85)
\nNet pension asset/(liability)
155
(23)
(43)
89
\nComprising:
\nRetirement benefit assets
195
\u2013
\u2013
195
\nRetirement benefit liabilities
(40)
(23)
(43)
(106)
\nNet pension asset/(liability)
155
(23)
(43)
89
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nMarket value of scheme assets
3,067
225
22
3,314
\nPresent value of funded scheme liabilities
(2,738)
(238)
(27)
(3,003)
\nSurplus restriction
(20)
\u2013
\u2013
(20)
\nSurplus/(deficit)
309
(13)
(5)
291
\nUnfunded pension plans
(43)
(7)
(40)
(90)
\nPost-retirement healthcare
(4)
(1)
(2)
(7)
\nPresent value of unfunded obligations
(47)
(8)
(42)
(97)
\nNet pension asset/(liability)
262
(21)
(47)
194
\nComprising:
\nRetirement benefit assets
309
\u2013
\u2013
309
\nRetirement benefit liabilities
(47)
(21)
(47)
(115)
\nNet pension asset/(liability)
262
(21)
(47)
194
\nWhere any individual scheme shows a recoverable surplus under IAS 19, this is disclosed on the
\nbalance sheet as a retirement benefit asset. The IAS 19 surplus of any one scheme is not available
\nto fund the IAS 19 deficit of another scheme. The retirement benefit asset disclosed arises from
\nthe rights of the employers to recover the surplus at the end of the life of the scheme, i.e., when
\nthe last beneficiary\u2019s obligation has been met.
\nAmounts recognised in the consolidated income statement
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nAmounts charged to operating profit
\nCurrent service cost
2
2
\nPast service costs \u2013 benefit equalisations
(5)
43
\nSettlement loss
1
171
\nHeadline scheme administration costs
4
4
\nNon-headline scheme administration costs
2
\u2013
\n4
220
\nThe operating cost is charged as follows:
\nHeadline administrative expenses
6
6
\nNon-headline settlement loss
1
171
\nNon-headline administrative expenses
(3)
43
\n4
220
\nAmounts credited to finance costs
\nNon-headline other finance income \u2013 retirement benefits
(7)
(7)
\nAmounts recognised directly in the consolidated statement of comprehensive income
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nRe-measurements of retirement defined benefit assets and liabilities
\nDifference between interest credit and return on assets
(660)
(835)
\nExperience gains on scheme liabilities
(54)
(31)
\nActuarial gains arising from changes in demographic assumptions
48
1
\nActuarial gains/(losses) arising from changes in financial assumptions
548
868
\nMovement in surplus restriction
4
(20)
\n(114)
(17)
\n
\n
Changes in present value of funded scheme assets
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
3,067
225
22
3,314
\nInterest on assets
105
10
1
116
\nActuarial movement on scheme assets
(638)
(21)
(1)
(660)
\nScheme administration costs
(5)
(1)
\u2013
(6)
\nForeign exchange rate movements
\u2013
(10)
\u2013
(10)
\nAssets distributed on settlements
\u2013
(4)
\u2013
(4)
\nBenefits paid
(162)
(13)
(2)
(177)
\nAt end of period
2,367
186
20
2,573
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
4,104
272
30
4,406
\nInterest on assets
70
8
1
79
\nActuarial movement on scheme assets
(773)
(62)
\u2013
(835)
\nEmployer contributions
3
\u2013
1
4
\nScheme administration costs
(3)
(1)
\u2013
(4)
\nForeign exchange rate movements
\u2013
33
\u2013
33
\nAssets transferred on business disposal
\u2013
\u2013
(5)
(5)
\nAssets distributed on settlements
(180)
\u2013
\u2013
(180)
\nCurtailment gains/(losses)
\u2013
(9)
\u2013
(9)
\nBenefits paid
(154)
(16)
(5)
(175)
\nAt end of period
3,067
225
22
3,314
\nChanges in present value of funded defined benefit obligations
\n31 July 2023 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
(2,738)
(238)
(27)
(3,003)
\nPast service costs
4
\u2013
\u2013
4
\nInterest on obligations
(94)
(10)
(1)
(105)
\nActuarial movement on liabilities
510
19
1
530
\nForeign exchange rate movements
\u2013
11
\u2013
11
\nLiabilities extinguished on settlements
\u2013
3
\u2013
3
\nBenefits paid
162
13
2
177
\nAt end of period
(2,156)
(202)
(25)
(2,383)
\n31 July 2022 \u2013 \u00a3m
\nUK
\nschemes
\nUS
\nschemes
\nOther
\ncountries
Total
\nAt beginning of period
(3,558)
(273)
(38)
(3,869)
\nPast service costs
(43)
\u2013
\u2013
(43)
\nInterest on obligations
(61)
(8)
(1)
(70)
\nActuarial movement on liabilities
761
54
2
817
\nForeign exchange rate movements
\u2013
(33)
\u2013
(33)
\nLiabilities transferred on business disposal
\u2013
\u2013
5
5
\nCurtailment gains/(losses)
\u2013
6
\u2013
6
\nLiabilities extinguished on settlements
9
\u2013
\u2013
9
\nBenefits paid
154
16
5
175
\nAt end of period
(2,738)
(238)
(27)
(3,003)
\nChanges in present value of unfunded defined benefit pensions and post-retirement
\nhealthcare plans
\nAssets
Obligations
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nAt beginning of period
\u2013
\u2013
(98)
(124)
\nCurrent service cost
\u2013
\u2013
(1)
(1)
\nInterest on obligations
\u2013
\u2013
(3)
(2)
\nActuarial movement
\u2013
\u2013
12
21
\nEmployer contributions
5
5
\u2013
\u2013
\nLiabilities transferred on business
\ndisposal
\u2013
\u2013
\u2013
4
\nBenefits paid
(5)
(5)
5
5
\nAt end of period
\u2013
\u2013
(85)
(97)
\n
\n
Changes in the effect of the asset ceiling over the year
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nIrrecoverable asset at beginning of period
(20)
\u2013
\nActuarial movement on scheme assets
4
(20)
\nAt end of period
(16)
(20)
\nCash contributions
\nCompany contributions to the defined benefit pension plans and post-retirement healthcare plans
\ntotalled \u00a35m (FY2022: \u00a39m). No contributions were made to funded schemes in the year (FY2022:
\n\u00a33m to SIPS, \u00a31m to Other). During the year, \u00a35m (FY2022: \u00a35m) was spent on providing benefits
\nunder unfunded defined benefit pension and post-retirement healthcare plans.
\nIn FY2024, cash contributions to the Group\u2019s schemes are expected to be up to \u00a310m in total.
\n9. EMPLOYEE SHARE SCHEMES
\nThe Group operates share schemes and plans for the benefit of employees. The nature of the
\nprincipal schemes and plans, including general conditions, is set out below:
\nLONG-TERM INCENTIVE PLAN (LTIP)
\nThe LTIP is a share plan under which an award over a capped number of shares will vest after the
\nend of a three-year performance period if performance conditions are met. LTIP awards are
\nmade to selected senior executives, including the Executive Directors.
\nLTIP performance conditions
\nEach performance condition has a threshold below which no shares vest and a maximum
\nperformance target at or above which the award vests in full. For performance between
\n\u2018threshold\u2019 and \u2018maximum\u2019, awards vest on a straight-line sliding scale. The performance
\nconditions are assessed separately; so performance on one condition does not affect the
\nvesting\u00a0of the other elements of the award. To the extent that the performance targets are not
\nmet\u00a0over the three-year performance period, awards lapse. There is no re-testing of the
\nperformance conditions.
\nLTIP awards have performance conditions relating to organic revenue growth, growth in headline
\nEPS, ROCE, free cash-flow and meeting ESG targets.
\nSMITHS EXCELLENCE PLAN (SEP)
\nThe last Smiths Excellence Plan (SEP) grant was issued in October 2019, vested on 31 July 2021
\nand exercised in October 2021. No further SEP awards have been made.
\nRESTRICTED STOCK
\nRestricted stock is used by the Remuneration & People Committee, as a part of recruitment
\nstrategy, to make awards in recognition of incentive arrangements forfeited on leaving a previous
\nemployer. If an award is considered appropriate, the award will take account of relevant factors
\nincluding the fair value of awards forfeited, any performance conditions attached, the likelihood of
\nthose conditions being met and the proportion of the vesting period remaining.
\nSAVE AS YOU EARN (SAYE)
\nThe SAYE scheme is an HM Revenue & Customs approved all-employee savings-related share
\noption scheme which is open to all UK employees. Participants enter into a contract to save a
\nfixed amount per month of up to \u00a3500 in aggregate for three years and are granted an option
\nover\u00a0shares at a fixed option price, set at a discount to market price at the date of invitation to
\nparticipate. The number of shares is determined by the monthly amount saved and the bonus paid
\non maturity of the savings contract. Options granted under the SAYE scheme are not subject to
\nany performance conditions.
\nOrdinary shares under option/award (\u2019000)
\nLong-term
\nincentive
\nplans
SEP
\nRestricted
\nstock
\nSave as you
\nearn
\nscheme
Total
\nWeighted
\naverage
\nexercise
\nprice
\n31 July 2021
4,915
851
64
1,085
6,915
\u00a31.63
\nReclassification
348
(348)
\u2013
\u2013
\u2013
\u2013
\nGranted
2,255
\u2013
212
167
2,634
\u00a30.71
\nExercised
(224)
(313)
(163)
(138)
(838)
\u00a31.90
\nLapsed
(1,984)
(190)
(30)
(229)
(2,433)
\u00a30.97
\n31 July 2022
5,310
\u2013
83
885
6,278
\u00a31.45
\nGranted
2,023
\u2013
24
253
2,300
\u00a31.47
\nExercised
(309)
\u2013
(20)
(109)
(438)
\u00a32.88
\nLapsed
(2,196)
\u2013
\u2013
(71)
(2,267)
\u00a30.33
\n31 July 2023
4,828
\u2013
87
958
5,873
\u00a31.78
\nOptions and awards were exercised on an irregular basis during the period. The average closing
\nshare price over the financial year was 1,629.8p (FY2022: 1,476.3p). There has been no change to
\nthe effective option price of any of the outstanding options during the period. The number of
\nexercisable share options at 31 July 2023 was nil (31 July 2022: nil).
\nRange of exercise prices
\nTotal shares under
\noptions/awards
\nat 31 July 2023
\n(\u2019000)
\nWeighted average
\nremaining
\ncontractual
\nlife at 31 July 2023
\n(months)
\nTotal shares under
\noptions/awards
\nat 31 July 2022
\n(\u2019000)
\nWeighted
\naverage
\nremaining
\ncontractual
\nlife at 31 July 2022
\n(months)
\n\u00a30.00 \u2013 \u00a32.00
4,915
17
5,393
19
\n\u00a36.01 \u2013 \u00a310.00
444
6
490
18
\n\u00a310.01 \u2013 \u00a312.00
514
33
395
29
\nFor the purposes of valuing options to arrive at the share-based payment charge, the binomial
\noption pricing model has been used. The key assumptions used in the model were volatility of 25%
\nto 20% (FY2022: 25% to 20%) and dividend yield of 2.4% (FY2022: 2.6%), based on historical data,
\nfor the period corresponding with the vesting period of the option. These generated a weighted
\naverage fair value for LTIP of \u00a315.03 (FY2022: \u00a314.81), and restricted stock of \u00a314.60 (FY2022:
\n\u00a314.59). Staff costs included \u00a314m (FY2022: \u00a315m) for share-based payments, of which \u00a313m
\n(FY2022: \u00a314m) related to equity-settled share-based payments.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f22222": {
"value": "9. EMPLOYEE SHARE SCHEMES The Group operates share schemes and plans for the benefit of employees. The nature of the
\nprincipal schemes and plans, including general conditions, is set out below:
\nLONG-TERM INCENTIVE PLAN (LTIP)
\nThe LTIP is a share plan under which an award over a capped number of shares will vest after the
\nend of a three-year performance period if performance conditions are met. LTIP awards are
\nmade to selected senior executives, including the Executive Directors.
\nLTIP performance conditions
\nEach performance condition has a threshold below which no shares vest and a maximum
\nperformance target at or above which the award vests in full. For performance between
\n\u2018threshold\u2019 and \u2018maximum\u2019, awards vest on a straight-line sliding scale. The performance
\nconditions are assessed separately; so performance on one condition does not affect the
\nvesting\u00a0of the other elements of the award. To the extent that the performance targets are not
\nmet\u00a0over the three-year performance period, awards lapse. There is no re-testing of the
\nperformance conditions.
\nLTIP awards have performance conditions relating to organic revenue growth, growth in headline
\nEPS, ROCE, free cash-flow and meeting ESG targets.
\nSMITHS EXCELLENCE PLAN (SEP)
\nThe last Smiths Excellence Plan (SEP) grant was issued in October 2019, vested on 31 July 2021
\nand exercised in October 2021. No further SEP awards have been made.
\nRESTRICTED STOCK
\nRestricted stock is used by the Remuneration & People Committee, as a part of recruitment
\nstrategy, to make awards in recognition of incentive arrangements forfeited on leaving a previous
\nemployer. If an award is considered appropriate, the award will take account of relevant factors
\nincluding the fair value of awards forfeited, any performance conditions attached, the likelihood of
\nthose conditions being met and the proportion of the vesting period remaining.
\nSAVE AS YOU EARN (SAYE)
\nThe SAYE scheme is an HM Revenue & Customs approved all-employee savings-related share
\noption scheme which is open to all UK employees. Participants enter into a contract to save a
\nfixed amount per month of up to \u00a3500 in aggregate for three years and are granted an option
\nover\u00a0shares at a fixed option price, set at a discount to market price at the date of invitation to
\nparticipate. The number of shares is determined by the monthly amount saved and the bonus paid
\non maturity of the savings contract. Options granted under the SAYE scheme are not subject to
\nany performance conditions.
\nOrdinary shares under option/award (\u2019000)
\nLong-term
\nincentive
\nplans
SEP
\nRestricted
\nstock
\nSave as you
\nearn
\nscheme
Total
\nWeighted
\naverage
\nexercise
\nprice
\n31 July 2021
4,915
851
64
1,085
6,915
\u00a31.63
\nReclassification
348
(348)
\u2013
\u2013
\u2013
\u2013
\nGranted
2,255
\u2013
212
167
2,634
\u00a30.71
\nExercised
(224)
(313)
(163)
(138)
(838)
\u00a31.90
\nLapsed
(1,984)
(190)
(30)
(229)
(2,433)
\u00a30.97
\n31 July 2022
5,310
\u2013
83
885
6,278
\u00a31.45
\nGranted
2,023
\u2013
24
253
2,300
\u00a31.47
\nExercised
(309)
\u2013
(20)
(109)
(438)
\u00a32.88
\nLapsed
(2,196)
\u2013
\u2013
(71)
(2,267)
\u00a30.33
\n31 July 2023
4,828
\u2013
87
958
5,873
\u00a31.78
\nOptions and awards were exercised on an irregular basis during the period. The average closing
\nshare price over the financial year was 1,629.8p (FY2022: 1,476.3p). There has been no change to
\nthe effective option price of any of the outstanding options during the period. The number of
\nexercisable share options at 31 July 2023 was nil (31 July 2022: nil).
\nRange of exercise prices
\nTotal shares under
\noptions/awards
\nat 31 July 2023
\n(\u2019000)
\nWeighted average
\nremaining
\ncontractual
\nlife at 31 July 2023
\n(months)
\nTotal shares under
\noptions/awards
\nat 31 July 2022
\n(\u2019000)
\nWeighted
\naverage
\nremaining
\ncontractual
\nlife at 31 July 2022
\n(months)
\n\u00a30.00 \u2013 \u00a32.00
4,915
17
5,393
19
\n\u00a36.01 \u2013 \u00a310.00
444
6
490
18
\n\u00a310.01 \u2013 \u00a312.00
514
33
395
29
\nFor the purposes of valuing options to arrive at the share-based payment charge, the binomial
\noption pricing model has been used. The key assumptions used in the model were volatility of 25%
\nto 20% (FY2022: 25% to 20%) and dividend yield of 2.4% (FY2022: 2.6%), based on historical data,
\nfor the period corresponding with the vesting period of the option. These generated a weighted
\naverage fair value for LTIP of \u00a315.03 (FY2022: \u00a314.81), and restricted stock of \u00a314.60 (FY2022:
\n\u00a314.59). Staff costs included \u00a314m (FY2022: \u00a315m) for share-based payments, of which \u00a313m
(FY2022: \u00a314m) related to equity-settled share-based payments.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f22416": {
"value": "10. INTANGIBLE ASSETS Goodwill
\n\u00a3m
\nDevelopment
\ncosts
\n\u00a3m
\nAcquired
\nintangibles
\n(see table
\nbelow)
\n\u00a3m
\nSoftware,
\npatents and
\nintellectual
\nproperty
\n\u00a3m
\nTotal
\n\u00a3m
\nCost
\nAt 31 July 2021
1,207
156
562
177
2,102
\nForeign exchange rate movements
104
6
68
10
188
\nAdditions
\u2013
12
\u2013
6
18
\nAt 31 July 2022
1,311
174
630
193
2,308
\nForeign exchange rate movements
(45)
(2)
(31)
(3)
(81)
\nBusiness combinations
7
\u2013
13
\u2013
20
\nAdditions
\u2013
21
\u2013
7
28
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
1,273
193
612
159
2,237
\nAmortisation and impairments
\nAt 31 July 2021
59
114
287
144
604
\nForeign exchange rate movements
4
6
35
6
51
\nAmortisation charge for the year
\u2013
3
51
7
61
\nImpairment charge for the year
4
\u2013
\u2013
\u2013
4
\nAt 31 July 2022
67
123
373
157
720
\nForeign exchange rate movements
(3)
(1)
(19)
(4)
(27)
\nAmortisation charge for the year
\u2013
2
52
7
61
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
64
124
406
122
716
\nNet book value at 31 July 2023
1,209
69
206
37
1,521
\nNet book value at 31 July 2022
1,244
51
257
36
1,588
\nNet book value at 31 July 2021
1,148
42
275
33
1,498
\nIn addition to goodwill, acquired intangible assets comprise:
\nPatents,
\nlicences
\nand
\ntrademarks
\n\u00a3m
\nTechnology
\n\u00a3m
\nCustomer
\nrelationships
\n\u00a3m
\nTotal
\nacquired
\nintangibles
\n\u00a3m
\nCost
\nAt 31 July 2021
17
134
411
562
\nForeign exchange rate movements
2
18
48
68
\nAt 31 July 2022
19
152
459
630
\nForeign exchange rate movements
\u2013
(9)
(22)
(31)
\nBusiness combinations
1
2
10
13
\nAt 31 July 2023
20
145
447
612
\nAmortisation
\nAt 31 July 2021
5
67
215
287
\nForeign exchange rate movements
1
10
24
35
\nCharge for the year
2
10
39
51
\nAt 31 July 2022
8
87
278
373
\nForeign exchange rate movements
\u2013
(6)
(13)
(19)
\nCharge for the year
1
11
40
52
\nAt 31 July 2023
9
92
305
406
\nNet book value at 31 July 2023
11
53
142
206
\nNet book value at 31 July 2022
11
65
181
257
\nNet book value at 31 July 2021
12
67
196
275
\nIndividually material intangible assets comprise:
\n\u2013
\u00a353m of customer-related intangibles attributable to United Flexible (remaining amortisation
\nperiod: 4 years);
\n\u2013
\u00a348m of customer-related intangibles attributable to Morpho Detection (remaining
\namortisation period: 6 years);
\n\u2013
\u00a327m of customer-related intangibles attributable to Royal Metal (remaining amortisation
\nperiod: 5 years);
\n\u2013
\u00a324m of development cost intangibles attributable to a computed tomography programme in
\nDetection that is currently under development; and
\n\u2013
\u00a318m of development cost intangibles attributable to a X-ray diffraction programme in
\nDetection that is currently under development.
\nThe charge associated with the amortisation of intangible assets is included in operating costs on
\nthe consolidated income statement.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f22417": {
"value": "10. INTANGIBLE ASSETS Goodwill
\n\u00a3m
\nDevelopment
\ncosts
\n\u00a3m
\nAcquired
\nintangibles
\n(see table
\nbelow)
\n\u00a3m
\nSoftware,
\npatents and
\nintellectual
\nproperty
\n\u00a3m
\nTotal
\n\u00a3m
\nCost
\nAt 31 July 2021
1,207
156
562
177
2,102
\nForeign exchange rate movements
104
6
68
10
188
\nAdditions
\u2013
12
\u2013
6
18
\nAt 31 July 2022
1,311
174
630
193
2,308
\nForeign exchange rate movements
(45)
(2)
(31)
(3)
(81)
\nBusiness combinations
7
\u2013
13
\u2013
20
\nAdditions
\u2013
21
\u2013
7
28
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
1,273
193
612
159
2,237
\nAmortisation and impairments
\nAt 31 July 2021
59
114
287
144
604
\nForeign exchange rate movements
4
6
35
6
51
\nAmortisation charge for the year
\u2013
3
51
7
61
\nImpairment charge for the year
4
\u2013
\u2013
\u2013
4
\nAt 31 July 2022
67
123
373
157
720
\nForeign exchange rate movements
(3)
(1)
(19)
(4)
(27)
\nAmortisation charge for the year
\u2013
2
52
7
61
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
64
124
406
122
716
\nNet book value at 31 July 2023
1,209
69
206
37
1,521
\nNet book value at 31 July 2022
1,244
51
257
36
1,588
\nNet book value at 31 July 2021
1,148
42
275
33
1,498
\nIn addition to goodwill, acquired intangible assets comprise:
\nPatents,
\nlicences
\nand
\ntrademarks
\n\u00a3m
\nTechnology
\n\u00a3m
\nCustomer
\nrelationships
\n\u00a3m
\nTotal
\nacquired
\nintangibles
\n\u00a3m
\nCost
\nAt 31 July 2021
17
134
411
562
\nForeign exchange rate movements
2
18
48
68
\nAt 31 July 2022
19
152
459
630
\nForeign exchange rate movements
\u2013
(9)
(22)
(31)
\nBusiness combinations
1
2
10
13
\nAt 31 July 2023
20
145
447
612
\nAmortisation
\nAt 31 July 2021
5
67
215
287
\nForeign exchange rate movements
1
10
24
35
\nCharge for the year
2
10
39
51
\nAt 31 July 2022
8
87
278
373
\nForeign exchange rate movements
\u2013
(6)
(13)
(19)
\nCharge for the year
1
11
40
52
\nAt 31 July 2023
9
92
305
406
\nNet book value at 31 July 2023
11
53
142
206
\nNet book value at 31 July 2022
11
65
181
257
\nNet book value at 31 July 2021
12
67
196
275
\nIndividually material intangible assets comprise:
\n\u2013
\u00a353m of customer-related intangibles attributable to United Flexible (remaining amortisation
\nperiod: 4 years);
\n\u2013
\u00a348m of customer-related intangibles attributable to Morpho Detection (remaining
\namortisation period: 6 years);
\n\u2013
\u00a327m of customer-related intangibles attributable to Royal Metal (remaining amortisation
\nperiod: 5 years);
\n\u2013
\u00a324m of development cost intangibles attributable to a computed tomography programme in
\nDetection that is currently under development; and
\n\u2013
\u00a318m of development cost intangibles attributable to a X-ray diffraction programme in
\nDetection that is currently under development.
\nThe charge associated with the amortisation of intangible assets is included in operating costs on
\nthe consolidated income statement.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f22418": {
"value": "10. INTANGIBLE ASSETS Goodwill
\n\u00a3m
\nDevelopment
\ncosts
\n\u00a3m
\nAcquired
\nintangibles
\n(see table
\nbelow)
\n\u00a3m
\nSoftware,
\npatents and
\nintellectual
\nproperty
\n\u00a3m
\nTotal
\n\u00a3m
\nCost
\nAt 31 July 2021
1,207
156
562
177
2,102
\nForeign exchange rate movements
104
6
68
10
188
\nAdditions
\u2013
12
\u2013
6
18
\nAt 31 July 2022
1,311
174
630
193
2,308
\nForeign exchange rate movements
(45)
(2)
(31)
(3)
(81)
\nBusiness combinations
7
\u2013
13
\u2013
20
\nAdditions
\u2013
21
\u2013
7
28
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
1,273
193
612
159
2,237
\nAmortisation and impairments
\nAt 31 July 2021
59
114
287
144
604
\nForeign exchange rate movements
4
6
35
6
51
\nAmortisation charge for the year
\u2013
3
51
7
61
\nImpairment charge for the year
4
\u2013
\u2013
\u2013
4
\nAt 31 July 2022
67
123
373
157
720
\nForeign exchange rate movements
(3)
(1)
(19)
(4)
(27)
\nAmortisation charge for the year
\u2013
2
52
7
61
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
64
124
406
122
716
\nNet book value at 31 July 2023
1,209
69
206
37
1,521
\nNet book value at 31 July 2022
1,244
51
257
36
1,588
\nNet book value at 31 July 2021
1,148
42
275
33
1,498
\nIn addition to goodwill, acquired intangible assets comprise:
\nPatents,
\nlicences
\nand
\ntrademarks
\n\u00a3m
\nTechnology
\n\u00a3m
\nCustomer
\nrelationships
\n\u00a3m
\nTotal
\nacquired
\nintangibles
\n\u00a3m
\nCost
\nAt 31 July 2021
17
134
411
562
\nForeign exchange rate movements
2
18
48
68
\nAt 31 July 2022
19
152
459
630
\nForeign exchange rate movements
\u2013
(9)
(22)
(31)
\nBusiness combinations
1
2
10
13
\nAt 31 July 2023
20
145
447
612
\nAmortisation
\nAt 31 July 2021
5
67
215
287
\nForeign exchange rate movements
1
10
24
35
\nCharge for the year
2
10
39
51
\nAt 31 July 2022
8
87
278
373
\nForeign exchange rate movements
\u2013
(6)
(13)
(19)
\nCharge for the year
1
11
40
52
\nAt 31 July 2023
9
92
305
406
\nNet book value at 31 July 2023
11
53
142
206
\nNet book value at 31 July 2022
11
65
181
257
\nNet book value at 31 July 2021
12
67
196
275
\nIndividually material intangible assets comprise:
\n\u2013
\u00a353m of customer-related intangibles attributable to United Flexible (remaining amortisation
\nperiod: 4 years);
\n\u2013
\u00a348m of customer-related intangibles attributable to Morpho Detection (remaining
\namortisation period: 6 years);
\n\u2013
\u00a327m of customer-related intangibles attributable to Royal Metal (remaining amortisation
\nperiod: 5 years);
\n\u2013
\u00a324m of development cost intangibles attributable to a computed tomography programme in
\nDetection that is currently under development; and
\n\u2013
\u00a318m of development cost intangibles attributable to a X-ray diffraction programme in
\nDetection that is currently under development.
\nThe charge associated with the amortisation of intangible assets is included in operating costs on
\nthe consolidated income statement.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f22423": {
"value": "Goodwill \u00a3m
\nDevelopment
\ncosts
\n\u00a3m
\nAcquired
\nintangibles
\n(see table
\nbelow)
\n\u00a3m
\nSoftware,
\npatents and
\nintellectual
\nproperty
\n\u00a3m
\nTotal
\n\u00a3m
\nCost
\nAt 31 July 2021
1,207
156
562
177
2,102
\nForeign exchange rate movements
104
6
68
10
188
\nAdditions
\u2013
12
\u2013
6
18
\nAt 31 July 2022
1,311
174
630
193
2,308
\nForeign exchange rate movements
(45)
(2)
(31)
(3)
(81)
\nBusiness combinations
7
\u2013
13
\u2013
20
\nAdditions
\u2013
21
\u2013
7
28
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
1,273
193
612
159
2,237
\nAmortisation and impairments
\nAt 31 July 2021
59
114
287
144
604
\nForeign exchange rate movements
4
6
35
6
51
\nAmortisation charge for the year
\u2013
3
51
7
61
\nImpairment charge for the year
4
\u2013
\u2013
\u2013
4
\nAt 31 July 2022
67
123
373
157
720
\nForeign exchange rate movements
(3)
(1)
(19)
(4)
(27)
\nAmortisation charge for the year
\u2013
2
52
7
61
\nDisposals
\u2013
\u2013
\u2013
(38)
(38)
\nAt 31 July 2023
64
124
406
122
716
\nNet book value at 31 July 2023
1,209
69
206
37
1,521
\nNet book value at 31 July 2022
1,244
51
257
36
1,588
\nNet book value at 31 July 2021
1,148
42
275
33
1,498
\nIn addition to goodwill, acquired intangible assets comprise:
\nPatents,
\nlicences
\nand
\ntrademarks
\n\u00a3m
\nTechnology
\n\u00a3m
\nCustomer
\nrelationships
\n\u00a3m
\nTotal
\nacquired
\nintangibles
\n\u00a3m
\nCost
\nAt 31 July 2021
17
134
411
562
\nForeign exchange rate movements
2
18
48
68
\nAt 31 July 2022
19
152
459
630
\nForeign exchange rate movements
\u2013
(9)
(22)
(31)
\nBusiness combinations
1
2
10
13
\nAt 31 July 2023
20
145
447
612
\nAmortisation
\nAt 31 July 2021
5
67
215
287
\nForeign exchange rate movements
1
10
24
35
\nCharge for the year
2
10
39
51
\nAt 31 July 2022
8
87
278
373
\nForeign exchange rate movements
\u2013
(6)
(13)
(19)
\nCharge for the year
1
11
40
52
\nAt 31 July 2023
9
92
305
406
\nNet book value at 31 July 2023
11
53
142
206
\nNet book value at 31 July 2022
11
65
181
257
\nNet book value at 31 July 2021
12
67
196
275Land and buildings
\n\u00a3m
\nPlant and
\nmachinery
\n\u00a3m
\nFixtures,
\nfittings,
\ntools and
\nequipment
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
172
388
122
682
\nForeign exchange rate movements
14
37
6
57
\nAdditions
4
42
6
52
\nDisposals
(14)
(10)
(5)
(29)
\nAt 31 July 2022
176
457
129
762
\nForeign exchange rate movements
(6)
(14)
(2)
(22)
\nBusiness combinations
\u2013
2
\u2013
2
\nAdditions
10
33
10
53
\nDisposals
(2)
(15)
(17)
(34)
\nAt 31 July 2023
178
463
120
761
\nDepreciation
\nAt 31 July 2021
106
260
104
470
\nForeign exchange rate movements
9
25
5
39
\nCharge for the year
7
24
7
38
\nDisposals
(14)
(10)
(4)
(28)
\nAt 31 July 2022
108
299
112
519
\nForeign exchange rate movements
(4)
(8)
(2)
(14)
\nCharge for the year
8
25
9
42
\nDisposals
(2)
(14)
(17)
(33)
\nAt 31 July 2023
110
302
102
514
\nNet book value at 31 July 2023
68
161
18
247
\nNet book value at 31 July 2022
68
158
17
243
\nNet book value at 31 July 2021
66
128
18
212Properties \u00a3m
\nVehicles
\n\u00a3m
\nEquipment
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
146
17
1
164
\nForeign exchange rate movements
12
1
\u2013
13
\nRecognition of right of use asset
18
4
\u2013
22
\nDerecognition of right of use asset
(2)
(1)
\u2013
(3)
\nAt 31 July 2022
174
21
1
196
\nForeign exchange rate movements
(6)
(1)
\u2013
(7)
\nRecognition of right of use asset
27
7
1
35
\nDerecognition of right of use asset
(5)
\u2013
\u2013
(5)
\nAt 31 July 2023
190
27
2
219
\nDepreciation
\nAt 31 July 2021
46
10
\u2013
56
\nForeign exchange rate movements
5
1
\u2013
6
\nCharge for the year
25
5
\u2013
30
\nDerecognition of right of use asset
(1)
(1)
\u2013
(2)
\nAt 31 July 2022
75
15
\u2013
90
\nForeign exchange rate movements
(4)
\u2013
\u2013
(4)
\nCharge for the year
27
4
1
32
\nDerecognition of right of use asset
(4)
\u2013
\u2013
(4)
\nAt 31 July 2023
94
19
1
114
\nNet book value at 31 July 2023
96
8
1
105
\nNet book value at 31 July 2022
99
6
1
106
\nNet book value at 31 July 2021
100
7
1
108",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f22714": {
"value": "11. IMPAIRMENT TESTING GOODWILL
\nGoodwill is tested for impairment at least annually or whenever there is an indication that the
\ncarrying value may not be recoverable.
\nFurther details of the impairment review process and judgements are included in the \u2018Sources
\nof\u00a0estimation uncertainty\u2019 section of the \u2018Basis of preparation\u2019 for the consolidated financial
\nstatements.
\nFor the purpose of impairment testing, assets are grouped at the lowest levels for which there
\nare separately identifiable cash-flows, known as cash generating units (CGUs), taking into
\nconsideration the commonality of reporting, policies, leadership and intra-divisional trading
\nrelationships. Goodwill acquired through business combinations is allocated to groups of CGUs at
\na divisional (or operating segment) level, being the lowest level at which management monitors
\nperformance separately.
\nThe carrying value of goodwill at 31 July is allocated by division as follows:
\n2023
\n\u00a3m
\n2023
\nNumber of
\nCGUs
\n2022
\n\u00a3m
\n2022
\nNumber of
\nCGUs
\nJohn Crane
131
1
132
1
\nSmiths Detection*
630
1
644
2
\nFlex-Tek
183
1
194
1
\nSmiths Interconnect
265
1
274
1
\n1,209
4
1,244
5
\n*
In FY2022 the Smiths Detection CGU was restructured. The Detection Russia business split into a separate CGU and
\nsubsequently fully impaired.
\nCritical estimates used in impairment testing
\nThe recoverable amount for impairment testing is determined from the higher of fair value
\nless\u00a0costs of disposal and value in use of the CGU. In assessing value in use, the estimated
\nfuture\u00a0cash-flows are discounted to their present value using a post-tax discount rate that
\nreflects\u00a0current market assessments of the time value of money, from which pre-tax discount
\nrates are determined.
\nFair value less costs of disposal is calculated using available information on past and expected
\nfuture profitability, valuation multiples for comparable quoted companies and similar
\ntransactions (adjusted as required for significant differences) and information on costs of similar
\ntransactions. Fair value less costs to sell models are used when trading projections in the
\nstrategic plan cannot be adjusted to eliminate the impact of a major restructuring.
\nThe value in use of CGUs is calculated as the net present value of the projected risk-adjusted
\ncash-flows of each CGU. These cash-flow forecasts are based on the FY2024 business plan and
\nthe five-year detailed divisional strategic projections which have been prepared by divisional
\nmanagement and approved by the Board.
\nThe principal assumptions used in determining the value in use were:
\n\u2013
Revenue: Projected sales were built up with reference to markets and product categories.
\nThey\u00a0incorporated past performance, historical growth rates and projections of developments
\nin key markets;
\n\u2013
Average earnings before interest and tax margin: Projected margins reflect historical
\nperformance, our expectations for future cost inflation and the impact of all completed projects
\nto improve operational efficiency and leverage scale. The projections did not include the impact
\nof future restructuring projects to which the Group was not yet committed;
\n\u2013
Projected capital expenditure: The cash-flow forecasts for capital expenditure were based
\non past experience and included committed ongoing capital expenditure consistent with the
\nFY2024 budget and the divisional strategic projections. The forecast did not include any future
\ncapital expenditure that improved/enhanced the operation/asset in excess of its current
\nstandard of performance;
\n\u2013
Discount rate: The discount rates have been determined with reference to illustrative weighted
\naverage cost of capital (WACC) for each CGU. In determining these discount rates, management
\nhave considered systematic risks specific to each of the Group\u2019s CGUs. These risk adjusted
\ndiscount rates have then been validated against the Group\u2019s WACC, the WACCs of the CGU\u2019s
\npeer group and an average of discount rates used by other companies for the industries in
\nwhich Smiths divisions operate. Pre-tax rates of 11.4% to 13.0% (FY2022: 11.3% to 12.3%) have
\nbeen used for the impairment testing; and
\n\u2013
Long-term growth rates: For the purposes of the Group\u2019s value in use calculations, a long-term
\ngrowth rate into perpetuity was applied immediately at the end of the five-year detailed forecast
\nperiod. CGU-specific long-term growth rates have been calculated by revenue weighting the
\nlong-term GDP growth rates of the markets that each CGU operates in. The long-term growth
\nrates used in the testing ranged from 2.2% to 2.7% (FY2022: 1.7% to 2.4%). These rates do not
\nreflect the long-term assumptions used by the Group for investment planning.
\nOf the principal assumptions above, the key assumptions that the impairment models are most
\nsensitive to are: the revenue growth assumption; the average earnings before interest and tax
\nmargin assumption; and the discount rate assumption.
\n
\n
The assumptions used in the impairment testing of CGUs with significant goodwill balances were
\nas follows:
\nAs at 31 May 2023
\nJohn Crane
\nSmiths
\nDetection
Flex-Tek
\nSmiths
\nInterconnect
\nNet book value of goodwill (\u00a3m)
135
649
191
279
\nBasis of valuation
Value in use
Value in use
Value in use
Value in use
\nDiscount rate
\u2013 pre-tax
13.0%
12.2%
11.8%
11.5%
\n\u2013 post-tax
9.7%
9.3%
9.4%
9.4%
\nPeriod covered by management projections
5 years
5 years
5 years
5 years
\nCapital expenditure \u2013 annual average over projection
\nperiod (\u00a3m)
27
27
10
20
\nRevenue \u2013 compound annual growth rate over
\nprojection period
5.3%
4.5%
3.4%
4.7%
\nAverage earnings before interest and tax margin
24.6%
14.5%
19.5%
18.6%
\nLong-term growth rates
2.7%
2.4%
2.2%
2.5%
\nAs at 31 May 2022
\nJohn Crane
\nSmiths
\nDetection
Flex-Tek
\nSmiths
\nInterconnect
\nNet book value of goodwill (\u00a3m)
132
640
187
266
\nBasis of valuation
Value in use
Value in use
Value in use
Value in use
\nDiscount rate
\u2013 pre-tax
12.3%
11.3%
11.7%
11.5%
\n\u2013 post-tax
9.1%
8.7%
9.2%
9.3%
\nPeriod covered by management projections
5 years
5 years
5 years
5 years
\nRevenue \u2013 compound annual growth rate over
\nprojection period
5.3%
3.8%
3.8%
6.0%
\nAverage earnings before interest and tax margin
24.9%
14.1%
19.7%
17.8%
\nLong-term growth rates
1.9%
2.4%
1.7%
2.1%
\nForecast earnings before interest and tax have been projected using:
\n\u2013
Expected future sales based on the strategic plan, which was constructed at a market level
\nwith input from key account managers, product line managers, business development and
\nsales teams. An assessment of the market and existing contracts/programmes was made to
\nproduce the sales forecast; and
\n\u2013
Current cost structure and production capacity, which include our expectations for future cost
\ninflation. The projections did not include the impact of future restructuring projects to which
\nthe Group was not yet committed.
\nSensitivity analysis
\nSmiths Detection is the only CGU of the Group that has limited goodwill impairment testing
\nheadroom. For all of the Group\u2019s other CGUs the recoverable amount of the CGU exceeded the
\ncarrying value, on the basis of the assumptions set out in the preceding tables and any reasonably
\npossible changes thereof.
\nThe estimated recoverable amount of the Smiths Detection CGU exceeded the carrying value by
\n\u00a3225m. Any decline in estimated value in use in excess of this amount would result in the
\nrecognition of impairment charges.
\nManagement recognise that the goodwill impairment testing headroom of the Smiths Detection
\nCGU is most sensitive to movements in the revenue growth rate, the EBIT margin and the
\ndiscount rate assumptions. Of these key assumptions, management consider that the EBIT
\nmargin assumption is the most sensitive.
\nThe Smiths Detection financial model assumes that EBIT margins grow from 11.2% in FY2023 to
\nan average of 14.5% over the five-year financial model period. This increase in EBIT margin is
\nprincipally driven by a change in revenue and profit mix, with the proportion of higher margin
\naftermarket revenue growing over the five-year projection period.
\nManagement considers that it is plausible that this margin growth may not be fully captured by
\nthe business. For the CGU to be impaired, the average EBIT margin over the five-year financial
\nmodel would have to be less than 12.3%; management recognises this to be a reasonably
\nplausible downside scenario.
\nIf the assumptions used in the impairment review were changed to a greater extent than as
\npresented in the following table, the changes would, in isolation, lead to impairment losses being
\nrecognised for the year ended 31 July 2023:
\nChange required for carrying value to equal recoverable amount \u2013 FY2023
Smiths Detection
\nRevenue \u2013 compound annual growth rate (CAGR) over five-year projection period
-460 bps decrease
\nAverage earnings before interest and tax margin
-220 bps decrease
\nPost-tax discount rate
+140 bps increase
\nChange required for carrying value to equal recoverable amount \u2013 FY2022
Smiths Detection
\nRevenue \u2013 compound annual growth rate (CAGR) over five-year projection period
-240 bps decrease
\nAverage earnings before interest and tax margin
-130 bps decrease
\nPost-tax discount rate
+70 bps increase
\nNote: Long-term growth rates are not included in the sensitivity tables above as management
\nconsider that there is no reasonably possible change in long-term growth rate that would result
\nin an impairment.
\n
\n
PROPERTY, PLANT AND EQUIPMENT, RIGHT OF USE ASSETS AND FINITE-LIFE
\nINTANGIBLE\u00a0ASSETS
\nAt each reporting period date, the Group reviews the carrying amounts of its property, plant,
\nequipment, right of use assets and finite-life intangible assets to determine whether there is any
\nindication that those assets have suffered an impairment loss.
\nThe Group has no indefinite life intangible assets other than goodwill. During the year, impairment
\ntests were carried out for capitalised development costs that have not yet started to be amortised
\nand acquired intangibles where there were indications of impairment. Value in use calculations
\nwere used to determine the recoverable values of these assets.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23038": {
"value": "12. PROPERTY, PLANT AND EQUIPMENT Land and
\nbuildings
\n\u00a3m
\nPlant and
\nmachinery
\n\u00a3m
\nFixtures,
\nfittings,
\ntools and
\nequipment
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
172
388
122
682
\nForeign exchange rate movements
14
37
6
57
\nAdditions
4
42
6
52
\nDisposals
(14)
(10)
(5)
(29)
\nAt 31 July 2022
176
457
129
762
\nForeign exchange rate movements
(6)
(14)
(2)
(22)
\nBusiness combinations
\u2013
2
\u2013
2
\nAdditions
10
33
10
53
\nDisposals
(2)
(15)
(17)
(34)
\nAt 31 July 2023
178
463
120
761
\nDepreciation
\nAt 31 July 2021
106
260
104
470
\nForeign exchange rate movements
9
25
5
39
\nCharge for the year
7
24
7
38
\nDisposals
(14)
(10)
(4)
(28)
\nAt 31 July 2022
108
299
112
519
\nForeign exchange rate movements
(4)
(8)
(2)
(14)
\nCharge for the year
8
25
9
42
\nDisposals
(2)
(14)
(17)
(33)
\nAt 31 July 2023
110
302
102
514
\nNet book value at 31 July 2023
68
161
18
247
\nNet book value at 31 July 2022
68
158
17
243
\nNet book value at 31 July 2021
66
128
18
212",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23170": {
"value": "13. RIGHT OF USE ASSETS Properties
\n\u00a3m
\nVehicles
\n\u00a3m
\nEquipment
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
146
17
1
164
\nForeign exchange rate movements
12
1
\u2013
13
\nRecognition of right of use asset
18
4
\u2013
22
\nDerecognition of right of use asset
(2)
(1)
\u2013
(3)
\nAt 31 July 2022
174
21
1
196
\nForeign exchange rate movements
(6)
(1)
\u2013
(7)
\nRecognition of right of use asset
27
7
1
35
\nDerecognition of right of use asset
(5)
\u2013
\u2013
(5)
\nAt 31 July 2023
190
27
2
219
\nDepreciation
\nAt 31 July 2021
46
10
\u2013
56
\nForeign exchange rate movements
5
1
\u2013
6
\nCharge for the year
25
5
\u2013
30
\nDerecognition of right of use asset
(1)
(1)
\u2013
(2)
\nAt 31 July 2022
75
15
\u2013
90
\nForeign exchange rate movements
(4)
\u2013
\u2013
(4)
\nCharge for the year
27
4
1
32
\nDerecognition of right of use asset
(4)
\u2013
\u2013
(4)
\nAt 31 July 2023
94
19
1
114
\nNet book value at 31 July 2023
96
8
1
105
\nNet book value at 31 July 2022
99
6
1
106
\nNet book value at 31 July 2021
100
7
1
108",
"dimensions": {
"concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23317": {
"value": "14. FINANCIAL ASSETS \u2013 OTHER INVESTMENTS Investment in
\nICU Medical,
\nInc equity
\n\u00a3m
\nDeferred
\ncontingent
\nconsideration
\n\u00a3m
\nInvestments
\nin early stage
\nbusinesses
\n\u00a3m
\nCash
\ncollateral
\ndeposit
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
\u2013
\u2013
7
4
11
\nForeign exchange rate movements
\u2013
\u2013
1
\u2013
1
\nAdditions
426
30
4
\u2013
460
\nDisposal
\u2013
\u2013
(4)
\u2013
(4)
\nFair value change through profit and loss
\u2013
(11)
1
\u2013
(10)
\nFair value change through other
\ncomprehensive income
(62)
\u2013
(1)
\u2013
(63)
\nAt 31 July 2022
364
19
8
4
395
\nFair value change through profit and loss
\u2013
(6)
\u2013
\u2013
(6)
\nFair value change through other
\ncomprehensive income
(17)
\u2013
(1)
\u2013
(18)
\nAt 31 July 2023
347
13
7
4
371
\nFollowing the sale of Smiths Medical the Group has recognised a financial asset for its investment
\nin 10% of the equity in ICU Medical, Inc (ICU) and a financial asset for the fair value of US$100m
\nadditional sales consideration that is contingent on the future share price performance of ICU.
\nThe Group\u2019s investments in early-stage businesses are in businesses that are developing or
\ncommercialising related technology. Cash collateral deposits represent amounts held on deposit
\nwith banks as security for liabilities or letters of credit.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23318": {
"value": "14. FINANCIAL ASSETS \u2013 OTHER INVESTMENTS Investment in
\nICU Medical,
\nInc equity
\n\u00a3m
\nDeferred
\ncontingent
\nconsideration
\n\u00a3m
\nInvestments
\nin early stage
\nbusinesses
\n\u00a3m
\nCash
\ncollateral
\ndeposit
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
\u2013
\u2013
7
4
11
\nForeign exchange rate movements
\u2013
\u2013
1
\u2013
1
\nAdditions
426
30
4
\u2013
460
\nDisposal
\u2013
\u2013
(4)
\u2013
(4)
\nFair value change through profit and loss
\u2013
(11)
1
\u2013
(10)
\nFair value change through other
\ncomprehensive income
(62)
\u2013
(1)
\u2013
(63)
\nAt 31 July 2022
364
19
8
4
395
\nFair value change through profit and loss
\u2013
(6)
\u2013
\u2013
(6)
\nFair value change through other
\ncomprehensive income
(17)
\u2013
(1)
\u2013
(18)
\nAt 31 July 2023
347
13
7
4
371
\nFollowing the sale of Smiths Medical the Group has recognised a financial asset for its investment
\nin 10% of the equity in ICU Medical, Inc (ICU) and a financial asset for the fair value of US$100m
\nadditional sales consideration that is contingent on the future share price performance of ICU.
\nThe Group\u2019s investments in early-stage businesses are in businesses that are developing or
\ncommercialising related technology. Cash collateral deposits represent amounts held on deposit
\nwith banks as security for liabilities or letters of credit.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23319": {
"value": "14. FINANCIAL ASSETS \u2013 OTHER INVESTMENTS Investment in
\nICU Medical,
\nInc equity
\n\u00a3m
\nDeferred
\ncontingent
\nconsideration
\n\u00a3m
\nInvestments
\nin early stage
\nbusinesses
\n\u00a3m
\nCash
\ncollateral
\ndeposit
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
\u2013
\u2013
7
4
11
\nForeign exchange rate movements
\u2013
\u2013
1
\u2013
1
\nAdditions
426
30
4
\u2013
460
\nDisposal
\u2013
\u2013
(4)
\u2013
(4)
\nFair value change through profit and loss
\u2013
(11)
1
\u2013
(10)
\nFair value change through other
\ncomprehensive income
(62)
\u2013
(1)
\u2013
(63)
\nAt 31 July 2022
364
19
8
4
395
\nFair value change through profit and loss
\u2013
(6)
\u2013
\u2013
(6)
\nFair value change through other
\ncomprehensive income
(17)
\u2013
(1)
\u2013
(18)
\nAt 31 July 2023
347
13
7
4
371
\nFollowing the sale of Smiths Medical the Group has recognised a financial asset for its investment
\nin 10% of the equity in ICU Medical, Inc (ICU) and a financial asset for the fair value of US$100m
\nadditional sales consideration that is contingent on the future share price performance of ICU.
\nThe Group\u2019s investments in early-stage businesses are in businesses that are developing or
\ncommercialising related technology. Cash collateral deposits represent amounts held on deposit
\nwith banks as security for liabilities or letters of credit.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23324": {
"value": "Investment in ICU Medical,
\nInc equity
\n\u00a3m
\nDeferred
\ncontingent
\nconsideration
\n\u00a3m
\nInvestments
\nin early stage
\nbusinesses
\n\u00a3m
\nCash
\ncollateral
\ndeposit
\n\u00a3m
\nTotal
\n\u00a3m
\nCost or valuation
\nAt 31 July 2021
\u2013
\u2013
7
4
11
\nForeign exchange rate movements
\u2013
\u2013
1
\u2013
1
\nAdditions
426
30
4
\u2013
460
\nDisposal
\u2013
\u2013
(4)
\u2013
(4)
\nFair value change through profit and loss
\u2013
(11)
1
\u2013
(10)
\nFair value change through other
\ncomprehensive income
(62)
\u2013
(1)
\u2013
(63)
\nAt 31 July 2022
364
19
8
4
395
\nFair value change through profit and loss
\u2013
(6)
\u2013
\u2013
(6)
\nFair value change through other
\ncomprehensive income
(17)
\u2013
(1)
\u2013
(18)
\nAt 31 July 2023
347
13
7
4
371
\nFollowing the sale of Smiths Medical the Group has recognised a financial asset for its investment
\nin 10% of the equity in ICU Medical, Inc (ICU) and a financial asset for the fair value of US$100m
\nadditional sales consideration that is contingent on the future share price performance of ICU.
\nThe Group\u2019s investments in early-stage businesses are in businesses that are developing or
\ncommercialising related technology. Cash collateral deposits represent amounts held on deposit
with banks as security for liabilities or letters of credit.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCollateralExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23417": {
"value": "15. INVENTORIES 31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nRaw materials and consumables
201
187
\nWork in progress
130
106
\nFinished goods
306
277
\nTotal inventories
637
570
\nIn FY2023, operating costs included \u00a31,622m (FY2022: \u00a31,323m) of inventory consumed, \u00a326m
\n(FY2022: \u00a312m) was charged for the write-down of inventory and \u00a316m (FY2022: \u00a312m) was
\nreleased from provisions no longer required.
\nINVENTORY PROVISIONING
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nGross inventory carried at full value
545
492
\nGross value of inventory partly or fully provided for
158
131
\n703
623
\nInventory provision
(66)
(53)
\nInventory after provisions
637
570",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInventoriesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23459": {
"value": "16. TRADE AND OTHER RECEIVABLES 31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNon-current
\nTrade receivables
2
1
\nContract assets
65
58
\nOther receivables
8
10
\n75
69
\nCurrent
\nTrade receivables
493
506
\nPrepayments
40
33
\nContract assets
121
127
\nOther receivables
118
72
\n772
738
\nTrade receivables do not carry interest. Management considers that the carrying value of trade
\nand other receivables approximates to the fair value. Trade and other receivables, including
\naccrued income and other receivables qualifying as financial instruments are accounted for at
\namortised cost. The maximum credit exposure arising from these financial assets was \u00a3744m
\n(FY2022:\u00a0\u00a3726m).
\n
\n
Contract assets comprise unbilled balances not yet due on contracts, where revenue recognition
\ndoes not align with the agreed payment schedule. The main movements in the year arose from
\nincreases in contract asset balances of \u00a319m (FY2022: \u00a319m) principally within Smiths
\nInterconnect and Smiths Detection, offset by \u00a39m decreases in John Crane and \u00a37m (FY2022:
\n\u00a315m) decrease due to foreign currency translation losses.
\nA number of Flex-Tek\u2019s and Interconnect\u2019s customers provide supplier finance schemes which
\nallow their suppliers to sell trade receivables, without recourse, to banks. This is commonly
\nknown as invoice discounting or factoring. During FY2023 the Group collected \u00a3128m of
\nreceivables through these schemes (FY2022: \u00a392m). The impact of invoice discounting on the
\nFY2023 balance sheet was that trade receivables were reduced by \u00a326m (2022: \u00a319m). Costs of
\ndiscounting were \u00a32m (FY2022: less than \u00a31m), charged to the income statement within financing
\ncosts. The cash received via these schemes was classified as an operating cash inflow as it had
\narisen from operating activities.
\nTrade receivables are disclosed net of provisions for expected credit loss, with historical write-
\noffs used as a basis, adjusted for factors that are specific to the debtor, general economic
\nconditions of the industry in which the debtor operates and a default risk multiplier applied to
\nreflect country risk premium. Credit risk is managed separately for each customer and, where
\nappropriate, a credit limit is set for the customer based on previous experience of the customer
\nand third-party credit ratings. The Group has no significant concentration of credit risk, with
\nexposure spread over a large number of customers. The largest single customer was the US
\nFederal Government, representing 7% (FY2022: 7%) of Group revenue.
\nAGEING OF TRADE RECEIVABLES
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nTrade receivables which are not yet due
389
396
\nTrade receivables which are between 1-30 days overdue
52
51
\nTrade receivables which are between 31-60 days overdue
19
24
\nTrade receivables which are between 61-90 days overdue
12
11
\nTrade receivables which are between 91-120 days overdue
8
7
\nTrade receivables which are more than 120 days overdue
45
54
\n525
543
\nExpected credit loss allowance provision
(30)
(36)
\nTrade receivables
495
507
\nMovement in expected credit loss allowance
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nBrought forward loss allowance at the start of the period
36
32
\nExchange adjustments
(1)
4
\nIncrease in allowance recognised in the income statement
4
8
\nAmounts written off or recovered during the year
(9)
(8)
\nCarried forward loss allowance at the end of the year
30
36",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23462": {
"value": "31 July 2023 \u00a3m
\n31 July 2022
\n\u00a3m
\nNon-current
\nTrade receivables
2
1
\nContract assets
65
58
\nOther receivables
8
10
\n75
69
\nCurrent
\nTrade receivables
493
506
\nPrepayments
40
33
\nContract assets
121
127
\nOther receivables
118
72
\n772
738",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23541": {
"value": "Trade receivables are disclosed net of provisions for expected credit loss, with historical write- offs used as a basis, adjusted for factors that are specific to the debtor, general economic
\nconditions of the industry in which the debtor operates and a default risk multiplier applied to
\nreflect country risk premium. Credit risk is managed separately for each customer and, where
\nappropriate, a credit limit is set for the customer based on previous experience of the customer
\nand third-party credit ratings. The Group has no significant concentration of credit risk, with
\nexposure spread over a large number of customers. The largest single customer was the US
\nFederal Government, representing 7% (FY2022: 7%) of Group revenue.
\nAGEING OF TRADE RECEIVABLES
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nTrade receivables which are not yet due
389
396
\nTrade receivables which are between 1-30 days overdue
52
51
\nTrade receivables which are between 31-60 days overdue
19
24
\nTrade receivables which are between 61-90 days overdue
12
11
\nTrade receivables which are between 91-120 days overdue
8
7
\nTrade receivables which are more than 120 days overdue
45
54
\n525
543
\nExpected credit loss allowance provision
(30)
(36)
\nTrade receivables
495
507
\nMovement in expected credit loss allowance
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nBrought forward loss allowance at the start of the period
36
32
\nExchange adjustments
(1)
4
\nIncrease in allowance recognised in the income statement
4
8
\nAmounts written off or recovered during the year
(9)
(8)
\nCarried forward loss allowance at the end of the year
30
36",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23604": {
"value": "17. TRADE AND OTHER PAYABLES 31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNon-current
\nOther payables
13
13
\nContract liabilities
27
33
\n40
46
\nCurrent
\nTrade payables
247
282
\nOther payables
51
57
\nOther taxation and social security costs
66
30
\nAccruals
200
183
\nContract liabilities
159
130
\n723
682
\nTrade and other payables, including accrued expenses and other payables qualifying as financial
\ninstruments, are accounted for at amortised cost and are categorised as \u201cTrade and other
\nfinancial payables\u201d in note 21.
\nContract liabilities comprise deferred income balances of \u00a3186m (FY2022: \u00a3163m) in respect of
\npayments being made in advance of revenue recognition. The movement in the year arises
\nprimarily from the long-term contracts of the Smiths Detection division where invoicing under
\nmilestones precedes the delivery of the programme performance obligations. Revenue
\nrecognised in the year includes \u00a397m (FY2022: \u00a3113m) that was included in the opening contract
\nliabilities balance. This revenue primarily relates to the delivery of performance obligations in the
\nSmiths Detection business.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23605": {
"value": "17. TRADE AND OTHER PAYABLES 31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNon-current
\nOther payables
13
13
\nContract liabilities
27
33
\n40
46
\nCurrent
\nTrade payables
247
282
\nOther payables
51
57
\nOther taxation and social security costs
66
30
\nAccruals
200
183
\nContract liabilities
159
130
\n723
682
\nTrade and other payables, including accrued expenses and other payables qualifying as financial
\ninstruments, are accounted for at amortised cost and are categorised as \u201cTrade and other
\nfinancial payables\u201d in note 21.
\nContract liabilities comprise deferred income balances of \u00a3186m (FY2022: \u00a3163m) in respect of
\npayments being made in advance of revenue recognition. The movement in the year arises
\nprimarily from the long-term contracts of the Smiths Detection division where invoicing under
\nmilestones precedes the delivery of the programme performance obligations. Revenue
\nrecognised in the year includes \u00a397m (FY2022: \u00a3113m) that was included in the opening contract
\nliabilities balance. This revenue primarily relates to the delivery of performance obligations in the
\nSmiths Detection business.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23606": {
"value": "17. TRADE AND OTHER PAYABLES 31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNon-current
\nOther payables
13
13
\nContract liabilities
27
33
\n40
46
\nCurrent
\nTrade payables
247
282
\nOther payables
51
57
\nOther taxation and social security costs
66
30
\nAccruals
200
183
\nContract liabilities
159
130
\n723
682
\nTrade and other payables, including accrued expenses and other payables qualifying as financial
\ninstruments, are accounted for at amortised cost and are categorised as \u201cTrade and other
\nfinancial payables\u201d in note 21.
\nContract liabilities comprise deferred income balances of \u00a3186m (FY2022: \u00a3163m) in respect of
\npayments being made in advance of revenue recognition. The movement in the year arises
\nprimarily from the long-term contracts of the Smiths Detection division where invoicing under
\nmilestones precedes the delivery of the programme performance obligations. Revenue
\nrecognised in the year includes \u00a397m (FY2022: \u00a3113m) that was included in the opening contract
\nliabilities balance. This revenue primarily relates to the delivery of performance obligations in the
\nSmiths Detection business.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23680": {
"value": "18. BORROWINGS AND NET DEBT This note sets out the calculation of net debt, an important measure in explaining our
\nfinancing\u00a0position. Net debt includes accrued interest and fair value adjustments relating to
\nhedge\u00a0accounting.
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash and cash equivalents
\nNet cash and deposits
285
1,056
\nShort-term borrowings
\n\u20ac600m 1.25% Eurobond 2023
\u2013
(502)
\nOverdrafts
\u2013
(1)
\nLease liabilities
(26)
(29)
\nInterest accrual
(3)
(6)
\n(29)
(538)
\nLong-term borrowings
\n\u20ac650m 2.00% Eurobond 2027
(534)
(538)
\nLease liabilities
(91)
(90)
\n(625)
(628)
\nBorrowings/gross debt
(654)
(1,166)
\nDerivatives managing interest rate risk and currency profile of the debt
(18)
(40)
\nNet debt
(387)
(150)
\nCASH AND CASH EQUIVALENTS
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash at bank and in hand
175
242
\nShort-term deposits
110
814
\nCash and cash equivalents
285
1,056
\nCash and cash equivalents include highly liquid investments with maturities of three months or
\nless. Borrowings are accounted for at amortised cost and are categorised as other financial
\nliabilities. See note 18 for a maturity analysis of\u00a0borrowings. Interest of \u00a317m (FY2022:\u00a0\u00a330m) was
\ncharged to the consolidated income statement in the period in respect of public bonds.
\nANALYSIS OF FINANCIAL DERIVATIVES ON BALANCE SHEET
\nNon-current
\nassets
\n\u00a3m
\nCurrent
\nassets
\n\u00a3m
\nCurrent
\nliabilities
\n\u00a3m
\nNon-current
\nliabilities
\n\u00a3m
\nNet balance
\n\u00a3m
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
\u2013
(18)
(18)
\nForeign exchange forward contracts
\u2013
5
(2)
\u2013
3
\nAt 31 July 2023
\u2013
5
(2)
(18)
(15)
\nDerivatives managing interest rate risk and
\ncurrency profile of the debt
\u2013
\u2013
(20)
(20)
(40)
\nForeign exchange forward contracts
\u2013
4
(7)
\u2013
(3)
\nAt 31 July 2022
\u2013
4
(27)
(20)
(43)
\nMOVEMENTS IN ASSETS/(LIABILITIES) ARISING FROM FINANCING ACTIVITIES
\nChanges in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\nForeign exchange
\ngains/(losses)
(10)
(21)
(10)
\u2013
(41)
(4,031)
(4,072)
\nNet cash inflow
\nfrom continuing
\noperations
(761)
564
\u2013
8
(189)
4,031
3,842
\nNet movement
\nfrom new leases
\nand modifications
\u2013
(34)
\u2013
\u2013
(34)
\u2013
(34)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
(2)
16
\u2013
14
\u2013
14
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
14
14
6
20
\nInterest expense
\ntaken to income
\nstatement*
\u2013
28
\u2013
\u2013
28
\u2013
28
\nInterest paid
\u2013
(29)
\u2013
\u2013
(29)
\u2013
(29)
\nReclassifications
\u2013
3
(3)
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2023
285
(29)
(625)
(18)
(387)
3
(384)
\n*
The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\n
\n
\n
Changes in net debt
\nChanges in
\nother financing
\nitems: FX
\ncontracts
\n\u00a3m
\nTotal
\nliabilities
\nfrom financing
\nactivities
\n\u00a3m
\nCash
\nand cash
\nequivalents
\n\u00a3m
\nOther
\nshort-term
\nborrowings
\n\u00a3m
\nLong-term
\nborrowings
\n\u00a3m
\nInterest rate
\n& cross-
\ncurrency
\nswaps
\n\u00a3m
\nNet debt
\n\u00a3m
\nAt 31 July 2021
405
(36)
(1,466)
75
(1,022)
1
(1,021)
\nForeign exchange
\ngains/(losses)
62
(3)
4
\u2013
63
(6,799)
(6,736)
\nNet cash inflow
\nfrom continuing
\noperations*
589
34
295
\u2013
918
6,799
7,717
\nNet movement
\nfrom lease
\nmodifications
\u2013
(22)
\u2013
\u2013
(22)
\u2013
(22)
\nInterest rate
\nhedge fair value
\nmovements
\u2013
2
27
\u2013
29
\u2013
29
\nRevaluation of
\nderivative contracts
\u2013
\u2013
\u2013
(115)
(115)
(4)
(119)
\nInterest expense
\ntaken to income
\nstatement**
\u2013
(35)
\u2013
\u2013
(35)
\u2013
(35)
\nInterest paid
\u2013
\u2013
34
\u2013
34
\u2013
34
\nReclassifications
\u2013
(478)
478
\u2013
\u2013
\u2013
\u2013
\nAt 31 July 2022
1,056
(538)
(628)
(40)
(150)
(3)
(153)
\n*
In FY22, the net cash inflow for the total Group including discontinued operations was \u00a3589m, \u00a357m of which related to
\nthe cash held by Smiths Medical at the time of disposal.
\n** The Group has also incurred \u00a39m (FY2022: \u00a38m) of bank charges that were expensed when paid and were not included
\nin net debt.
\nCASH POOLING
\nCash and overdraft balances in interest compensation cash pooling systems are reported gross
\non the balance sheet. The cash pooling agreements incorporate a legally enforceable right of
\nnet\u00a0settlement. However, as there is no intention to settle the balances net, these arrangements
\ndo not qualify for net presentation. At 31 July 2023 the total value of overdrafts on accounts in
\ninterest compensation cash pooling systems was \u00a3nil (FY2022: \u00a3nil). The balances held in zero
\nbalancing cash pooling arrangements have daily settlement of balances. Therefore netting is
\nnot\u00a0relevant.
\nCHANGE OF CONTROL
\nThe Company has in place credit facility agreements under which a change of control would
\ntrigger prepayment clauses. The Company has one bond in issue, the terms of which would allow
\nbondholders to exercise put options and require the Company to buy back the bonds at their
\nprincipal amount plus interest if a rating downgrade occurs at the same time as a change of
\ncontrol takes effect.
\nLEASE LIABILITIES
\nLease liabilities have been measured at the present value of the remaining lease payments.
\nThe\u00a0weighted average incremental borrowing rate applied to lease liabilities in FY2023 was 4.01%
\n(FY2022: 3.63%).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f23731": {
"value": "CASH AND CASH EQUIVALENTS 31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash at bank and in hand
175
242
\nShort-term deposits
110
814
\nCash and cash equivalents
285
1,056",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f24097": {
"value": "LEASE LIABILITIES Lease liabilities have been measured at the present value of the remaining lease payments.
\nThe\u00a0weighted average incremental borrowing rate applied to lease liabilities in FY2023 was 4.01%
(FY2022: 3.63%).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLeasesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f24106": {
"value": "19. FINANCIAL RISK MANAGEMENT The Group\u2019s international operations and debt financing expose it to financial risks which include
\nthe effects of changes in foreign exchange rates, debt market prices, interest rates, credit risks
\nand liquidity risks. The management of operational credit risk is discussed in note 16.
\nTREASURY RISK MANAGEMENT POLICY
\nThe Board maintains a Treasury Risk Management Policy, which governs the treasury operations
\nof the Group and its subsidiary companies and the consolidated financial risk profile to be
\nmaintained. A report on treasury activities, financial metrics and compliance with the Policy is
\ncirculated to the Chief Financial Officer each month and key elements to the Audit & Risk
\nCommittee on a semi-annual basis.
\nThe Policy maintains a treasury control framework within which counterparty risk, financing
\nand\u00a0debt strategy, cash and liquidity, interest rate risk and currency translation management
\nare\u00a0reserved for Group Treasury, while currency transaction management is devolved to
\noperating divisions.
\nCentrally directed cash management systems exist globally to manage overall liquid resources
\nefficiently across the divisions. The Group uses financial instruments to raise financing for its
\nglobal operations, to manage related interest rate and currency financial risk, and to hedge
\ntransaction risk within subsidiary companies.
\nThe Group does not speculate in financial instruments. All financial instruments hedge existing
\nbusiness exposures and all are recognised on the balance sheet.
\nThe Policy defines four treasury risk components and for each component a set of financial
\nmetrics to be measured and reported monthly against pre-agreed objectives.
\n1) Credit quality
\nThe Group\u2019s strategy is to maintain a solid investment-grade rating to ensure access to the widest
\npossible sources of financing at the right time and to optimise the resulting cost of debt capital.
\nThe credit ratings at the end of July 2023 were BBB+ / Baa2 (both stable) from Standard & Poor\u2019s
\nand Moody\u2019s respectively. An essential element of an investment-grade rating is consistent and
\nrobust cash-flow metrics. The Group\u2019s objective is to maintain a net debt/headline EBITDA ratio of
\ntwo times or lower over the medium term. Capital management is discussed in more detail in
\nnote 26.
\n2) Debt and interest rate
\nThe Group\u2019s risk management objectives are to ensure that the majority of funding is drawn from
\nthe public debt markets with the average maturity profile of gross debt to be at or greater than
\nthree years, and between 40-60% of gross debt (excluding leases) is at fixed rates. At 31 July 2023
\nthese measures were 100% (FY2022: 100%), 3.6 years (FY2022: 2.7 years) and 54% (FY2022: 44%).
\n
\n
\n
The Group has no financial covenants in its external debt agreements. Interest rate risk
\nmanagement is discussed in note 19(b).
\n3) Liquidity management
\nThe Group\u2019s objective is to ensure that at any time undrawn committed facilities, net of short-
\nterm overdraft financing, are at least \u00a3300m and that committed facilities have at least 12 months
\nto run until maturity. At 31 July 2023, these measures were \u00a3622m (FY2022: \u00a3657m) and 57
\nmonths (FY2022: 27 months). At 31 July 2023, net cash resources were \u00a3285m (FY2022: \u00a31,055m).
\nLiquidity risk management is discussed in note 19(d).
\n4) Currency management
\nThe Group is an international business with the majority of its net assets denominated in foreign
\ncurrency. It protects the balance sheet and reserves from adverse foreign exchange movements
\nby financing foreign currency assets where appropriate in the same currency. The Group\u2019s
\nobjective for managing transaction currency exposure is to reduce medium-term volatility to
\ncash-flow, margins and earnings. Foreign exchange risk management is discussed in note 19(a)
\nbelow.
\n(A) FOREIGN EXCHANGE RISK
\nTransactional currency exposure
\nThe Group is exposed to foreign currency risks arising from sales or purchases by businesses in
\ncurrencies other than their functional currency. It is Group policy that, when the net foreign
\nexchange exposure to known future sales and purchases is material, this exposure is hedged
\nusing forward foreign exchange contracts. The net exposure is calculated by adjusting the
\nexpected cash-flow for payments or receipts in the same currency linked to the sale or purchase.
\nThis policy minimises the risk that the profits generated from the transaction will be affected by
\nforeign exchange movements which occur after the price has been determined. Hedge accounting
\ndocumentation and effectiveness testing are only undertaken if it is cost-effective.
\nThe following table shows the currency of financial instruments. It excludes loans and derivatives
\ndesignated as net investment hedges.
\nAt 31 July 2023
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
43
372
127
184
726
\nFinancial instruments included in trade and
\nother payables
(64)
(216)
(93)
(103)
(476)
\nCash and cash equivalents
50
115
29
91
285
\nBorrowings not designated as net investment
\nhedges
(27)
(54)
(12)
(24)
(117)
\n2
217
51
148
418
\nExclude balances held in operations with the
\nsame functional currency.
(7)
(287)
(57)
(153)
(504)
\nExposure arising from intra-Group loans
\u2013
127
28
(73)
82
\nFuture forward foreign exchange contract
\ncash-flows
(63)
(23)
(48)
133
(1)
\n(68)
34
(26)
55
(5)
\nAt 31 July 2022
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
41
423
114
169
747
\nFinancial instruments included in trade and
\nother payables
(52)
(239)
(98)
(101)
(490)
\nCash and cash equivalents
355
506
74
120
1,055
\nBorrowings not designated as net investment
\nhedges
(28)
(58)
(14)
(19)
(119)
\n316
632
76
169
1,193
\nExclude balances held in operations with the
\nsame functional currency.
(322)
(149)
(80)
(142)
(693)
\nExposure arising from intra-Group loans
\u2013
(419)
(27)
(89)
(535)
\nFuture forward foreign exchange contract
\ncash-flows
(42)
(40)
(38)
120
\u2013
\n(48)
24
(69)
58
(35)
\nFinancial instruments included in trade and other receivables comprise trade receivables,
\naccrued income and other receivables which qualify as financial instruments. Similarly, financial
\ninstruments included in trade and other payables comprise trade payables, accrued expenses
\nand other payables that qualify as financial instruments.
\n
\n
\n
Based on the assets and liabilities held at the year-end, if the specified currencies were to
\nstrengthen 10% while all other market rates remained constant, the change in the fair value of
\nfinancial instruments not designated as net investment hedges would have the following\u00a0effect:
\nImpact on
\nprofit
\nfor the year
\nFY2023
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2023
\n\u00a3m
\nImpact on
\nprofit
\nfor the year
\nFY2022
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2022
\n\u00a3m
\nUS dollar
\u2013
1
(3)
1
\nEuro
1
\u2013
8
(1)
\nSterling
\u2013
(1)
4
\u2013
\nThese sensitivities were calculated before adjusting for tax and exclude the effect of quasi-equity
\nintra-Group loans.
\nCash-flow hedging
\nThe Group uses forward foreign exchange contracts to hedge future foreign currency sales and
\npurchases. At 31 July 2023, contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) were
\ndesignated as hedging instruments. In addition, the Group had outstanding foreign currency
\ncontracts with a nominal value of \u00a3252m (FY2022: \u00a3226m) which were being used to manage
\ntransactional foreign exchange exposures, but were not accounted for as cash-flow hedges. The
\nfair value of the contracts is disclosed in note 20.
\nThe majority of hedged transactions will be recognised in the consolidated income statement in
\nthe same period that the cash-flows are expected to occur, with the only differences arising
\nbecause of normal commercial credit terms on sales and purchases. It is the Group\u2019s policy to
\nhedge 80% of certain exposures for the next two years and 50% of highly probable exposures for
\nthe next 12 months.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The foreign exchange forward contracts have similar
\ncritical terms to the hedged items, such as the notional amounts and maturities. Therefore, there
\nis an economic relationship and the hedge ratio is established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\nGroup\u2019s and the counterparty credit risks on the fair value of the foreign exchange forward
\ncontracts, which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs. Of the foreign exchange contracts designated
\nas hedging instruments, 98% are for periods of 12 months or less (FY2022: 98%).
\nThe following table presents a reconciliation by risk category of the cash-flow hedge reserve and
\nanalysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward cash-flow hedge reserve at start of year
(3)
2
\nForeign exchange forward contracts:
Net fair value gains on effective hedges
1
(6)
\nAmount reclassified to income statement
\n\u2013 finance costs
2
1
\nCarried forward cash-flow hedge reserve at end of year
\u2013
(3)
\nThe following tables set out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the cash-flow hedge reserve:
\nHedged item
Hedged exposure
Hedging instrument
\nFinancial
\nyear
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCash-flow hedge
\nreserve
\n\u00a3m
\nSales and
\npurchases
\nForeign
\ncurrency risk
\nForeign exchange
\ncontracts
\nFY2023
1
(1)
1
\nFY2022
(6)
6
(6)
\nCash-flow hedges generated \u00a3nil of ineffectiveness in FY2023 (FY2022: \u00a3nil) which was
\nrecognised in the income statement through finance costs.
\nTranslational currency exposure
\nThe Group has significant investments in overseas operations, particularly in the US and Europe.\u00a0As
\na result, the sterling value of the Group\u2019s balance sheet can be significantly affected by\u00a0movements
\nin exchange rates. The Group seeks to mitigate the effect of these translational currency exposures
\nby matching the net investment in overseas operations with borrowings denominated in their
\nfunctional currencies, except where significant adverse interest differentials or other factors would
\nrender the cost of such hedging activity uneconomic. This is achieved by borrowing primarily in the
\nrelevant currency or in some cases indirectly using cross-currency swaps.
\nNet investment hedges
\nThe table below sets out the currency of loans and swap contracts designated as net investment
\nhedges:
\nAt 31 July 2023
At 31 July 2022
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nLoans designated as net
\ninvestment hedges
\u2013
(293)
(293)
\u2013
(451)
(451)
\nCross-currency swap
(247)
\u2013
(247)
(615)
\u2013
(615)
\n(247)
(293)
(540)
(615)
(451)
(1,066)
\n
\n
\n
At 31 July 2023, cross-currency swaps hedged the Group\u2019s exposure to US dollars and euros
\n(31\u00a0July 2022: US dollars and euros). All the cross-currency swaps designated as net investment
\nhedges were non-current (FY2022: current and non-current). Swaps generating \u00a3247m of the US
\ndollar exposure (FY2022: \u00a3261m) will mature in February 2027.
\nIn addition, non-swapped borrowings were also used to hedge the Group\u2019s exposure to euros
\n(31\u00a0July 2022: US dollars and euros). Borrowings generating \u00a3293m of the euro exposure
\n(FY2022: \u00a3287m) will mature in February\u00a02027.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The swaps and borrowings have the same notional
\namount as the hedged items and, therefore, there is an economic relationship with the hedge
\nratio established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\ncounterparty and the Group\u2019s own credit risk on the fair value of the foreign exchange forward
\ncontracts which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs.
\nThe following table presents a reconciliation by risk category of the net investment hedge reserve
\nand analysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward net investment hedge reserve at start of year
(207)
(238)
\nCross-currency swaps *
Net fair value gains on effective hedges
40
(77)
\nBonds
Net fair value gains on effective hedges
(29)
5
\nAmounts removed from the hedge
\nreserve and recognised in the income
\nstatement
Profit/(loss) on business disposal
\u2013
103
\nCarried forward net investment hedge reserve at end of year
(196)
(207)
\n*
The FY2022 reported amount for net fair value losses on effective hedges of cross-currency swaps was incorrectly
\npresented as \u00a382m rather than \u00a377m. The total reserve balances and net assets for FY2022 are not impacted by the
\ncorrection to this table.
\nThe following table sets out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the net investment hedge reserve as
\nat 31 July 2022 and 31 July 2021:
\nHedged item
Hedged exposure
Hedging instrument
Financial year
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nNet investment
\nhedge\u00a0reserve
\n\u00a3m
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2023
(40)
40
40
\nBonds
FY2023
29
(29)
(29)
\n(11)
11
11
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2022
82
(82)
(82)
\nBonds
FY2022
(5)
5
5
\n77
(77)
(77)
\nNet investment hedges generated \u00a31m of ineffectiveness in FY2022 (FY2022: \u00a31m) which was
\nrecognised in the income statement through finance costs.
\nThe fair values of these net investment hedges are subject to exchange rate movements.
\nBased\u00a0on the hedging instruments in place at\u00a0the\u00a0year-end, if the specified currencies
\nwere\u00a0to\u00a0strengthen 10% while all other market rates remained constant, it would have the
\nfollowing effect:
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2023
\n\u00a3m
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2022
\n\u00a3m
\nUS dollar
27
68
\nEuro
33
50
\nThese movements would be fully offset by an opposite movement on the retranslation of the net
\nassets of the overseas subsidiaries. These sensitivities were calculated before adjusting for tax.
\n(B) INTEREST RATE RISK
\nThe Group operates an interest rate policy designed to optimise interest cost and reduce volatility
\nin reported earnings. The Group\u2019s current policy is to require interest rates to be fixed within a band
\nof between 40% and 60 % of the level of gross debt (excluding leases). This is achieved through fixed
\nrate borrowings and interest rate swaps. At 31 July 2023 54% (FY2022: 44%) of the Group\u2019s gross
\nborrowings (excluding leases) were at fixed interest rates, after adjusting for interest rate swaps
\nand the impact of short maturity derivatives designated as net investment hedges.
\nThe Group monitors its fixed rate risk profile against both gross and net debt. For medium-term
\nplanning, it focuses on gross debt to eliminate the fluctuations of variable cash levels over the
\ncycle. The weighted average interest rate on borrowings and cross-currency swaps at 31 July
\n2023, after interest rate swaps, was 4.53% (FY2022: 3.06%).
\n
\n
\n
Interest rate profile of financial assets and liabilities and the fair value of borrowings
\nThe following table shows the interest rate risk exposure of investments, cash and borrowings,
\nwith the borrowings adjusted for the impact of interest rate hedging. Other financial assets and
\nliabilities do not earn or bear interest, and for all financial instruments except borrowings, the
\ncarrying value is not materially different from their fair value.
\nAs at 31 July 2023
\nAt fair value
\nthrough
\nprofit or loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(29)
(29)
\nBetween one and five years
\u2013
\u2013
(365)
(347)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(418)
(400)
\nFloating rate interest financial assets/(liabilities)
4
215
(236)
(240)
\nTotal interest-bearing financial assets/(liabilities)
4
215
(654)
(640)
\nNon-interest-bearing assets in the same category
\u2013
70
\u2013
\u2013
\nTotal
4
285
(654)
(640)
\nAs at 31 July 2022
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(203)
(203)
\nBetween one and five years
\u2013
\u2013
(357)
(359)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(584)
(586)
\nFloating rate interest financial assets/(liabilities)*
4
970
(582)
(586)
\nTotal interest-bearing financial assets/(liabilities)
4
970
(1,166)
(1,172)
\nNon-interest-bearing assets in the same category
\u2013
86
\u2013
\u2013
\nTotal
4
1,056
(1,166)
(1,172)
\n*
Floating rate interest financial assets in the prior year have been amended to remove the investments in ICU Medical
\nInc., contingent consideration and investments in early-stage business that were incorrectly reported as having
\ninterest rate exposure.
\nInterest rate hedging
\nThe Group also has exposures to the fair values of non-derivative financial instruments such as
\nEUR fixed rate borrowings. To manage the risk of changes in these fair values, the Group has
\nentered into fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which
\nfor accounting purposes are designated as fair value hedges.
\nAt 31 July 2023 and 31 July 2022, the Group had designated the following hedges against
\nvariability in the fair value of borrowings arising from fluctuations in base rates:
\n\u2013
\u20ac300m of the fixed/floating and \u20ac exchange exposure of EUR/USD interest rate swaps
\nmaturing on 23 February 2027 partially hedging the \u20ac 2027 Eurobond; and
\n\u2013
\u20ac400m of the fixed/floating element of the EUR/USD interest rate swaps that partially hedged
\nthe \u20ac 2023 Eurobond was repaid on 28 April 2022.
\nThe fair values of the hedging instruments are disclosed in note 20. The effect of the swaps was to
\nconvert \u00a3257m (FY2022: \u00a3588m) debt from fixed rate to floating rate. The swaps have similar
\ncritical terms to the hedged items, such as the reference rate, reset dates, notional amounts,
\npayment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is
\nestablished as 1:1. Hedge effectiveness is determined at the inception of the hedge relationship,
\nand through periodic prospective effectiveness assessments to ensure that an economic
\nrelationship exists between the hedged item and hedging instrument.
\nThe main source of hedge ineffectiveness in these hedging relationships is the effect of the
\ncurrency basis risk on cross-currency interest rate swaps which are not reflected in the fair value
\nof the hedged item. No other sources of ineffectiveness emerged from these hedging
\nrelationships. Any hedge ineffectiveness was recognised immediately in the income statement in
\nthe period in which it occurred.
\n
\n
\n
The following table sets out the details of the hedged exposures covered by the Group\u2019s fair value hedges:
\nHedged item
Hedged exposure
Financial year
\nChanges in value
\nof hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCarrying amount
\nAccumulated fair value
\nadjustments on hedged item
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nFixed rate bonds (a)
\nInterest rate risk
FY2023
(2)
2
\u2013
\u2013
\u2013
\u2013
\nInterest rate & currency rate risk
FY2023
16
(16)
\u2013
233
\u2013
(21)
\n14
(14)
\u2013
233
\u2013
(21)
\nFixed rate bonds (a)
\nInterest rate risk
FY2022
8
(8)
\u2013
336
\u2013
(2)
\nInterest rate & currency rate risk
FY2022
21
(20)
\u2013
252
\u2013
(5)
\n29
(28)
\u2013
588
\u2013
(7)
\n(a) Classified as borrowings.
\nFair value hedges generated a \u00a3nil ineffectiveness in FY2023 (FY2022: \u00a31m) which was recognised
\nin the income statement through finance costs.
\nSensitivity of interest charges to interest rate movements
\nThe Group has exposure to sterling, US dollar and euro interest rates. However, the Group does
\nnot have a significant exposure to interest rate movements for any individual currency. Based on
\nthe composition of net debt and investments at 31 July 2023, and taking into consideration all fixed
\nrate borrowings and interest rate swaps in place, a one percentage point (100 basis points)
\nchange in average floating interest rates for all three currencies would have a \u00a32m impact
\n(FY2022: \u00a32m impact) on the Group\u2019s profit before tax.
\n(C) FINANCIAL CREDIT RISK
\nThe Group is exposed to credit-related losses in the event of non-performance by counterparties
\nto financial instruments, but does not currently expect any counterparties to fail to meet their
\nobligations. Credit risk is mitigated by the Board-approved policy of only placing cash deposits
\nwith highly rated relationship bank counterparties within counterparty limits established by
\nreference to their Standard & Poor\u2019s long-term debt rating. In the normal course of business, the
\nGroup operates cash pooling systems, where a legal right of set-off applies.
\nThe maximum credit risk exposure in the event of other parties failing to perform their obligations
\nunder financial assets, excluding trade and other receivables and derivatives, totals \u00a3295m at 31
\nJuly 2023 (FY2022: \u00a31,067m).
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash in AAA liquidity funds
78
551
\nCash at banks with at least a AA- credit rating
31
104
\nCash at banks with all other A credit ratings
170
397
\nCash at other banks
6
4
\nInvestments in bank deposits
4
4
\nOther investments
7
7
\n296
1,067
\nAt 31 July 2023, the maximum exposure with a single bank for deposits and cash was \u00a365m
\n(FY2022: \u00a3339m). The bank has a credit rating of A+. The maximum mark to market exposure with
\na single bank for derivatives was out of the money in both the current and prior year and does not
\nrepresent a credit risk.
\n
\n
\n
(D) LIQUIDITY RISK
\nBorrowing facilities
\nBoard policy specifies the maintenance of unused committed credit facilities of at least \u00a3300m at
\nall times to ensure that the Group has sufficient available funds for operations and planned
\ndevelopment. The\u00a0Group has Revolving Credit Facilities of US$800m maturing 5 May 2028. At\u00a0the
\nbalance sheet date, the Group had the following undrawn credit facilities:
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nExpiring after more than four years (FY 2022: two years)
622
657
\nCash deposits
\nAs at 31 July 2023, \u00a3110m (FY2022: \u00a3814m) of cash and cash equivalents was on deposit with
\nvarious banks of which \u00a378m (FY2022: \u00a3558m) was in liquidity funds. \u00a34m (FY2022: \u00a34m) of
\ninvestments comprised bank deposits held to secure liabilities and letters of credit.
\nGross contractual cash-flows for borrowings
\nAs at 31 July 2023
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(29)
\u2013
(11)
(40)
\nBetween one and two years
(27)
\u2013
(11)
(38)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(13)
\u2013
(11)
(24)
\nBetween four and five years
(561)
21
\u2013
(540)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(674)
21
(44)
(697)
\nAs at 31 July 2022
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(539)
2
(17)
(554)
\nBetween one and two years
(23)
\u2013
(11)
(34)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(14)
\u2013
(11)
(25)
\nBetween four and five years
(552)
5
(11)
(558)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(1,172)
7
(61)
(1,226)
\nThe figures presented in the borrowings column include the non-cash adjustments which are
\nhighlighted in the adjacent column. The contractual interest reported for borrowings is before the
\neffect of interest rate swaps.
\nGross contractual cash-flows for derivative financial instruments
\nAs at 31 July 2023
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
209
(204)
5
\nGreater than one year
6
(6)
\u2013
\nLiabilities
\nLess than one year
159
(161)
(2)
\nGreater than one year
252
(270)
(18)
\nTotal
626
(641)
(15)
\nAs at 31 July 2022
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
495
(521)
(26)
\nGreater than one year
270
(290)
(20)
\nLiabilities
\nLess than one year
212
(209)
3
\nGreater than one year
8
(8)
\u2013
\nTotal
985
(1,028)
(43)
\nThis table above presents the undiscounted future contractual cash-flows for all derivative
\nfinancial instruments. For this disclosure, cash-flows in foreign currencies are translated using
\nthe spot rates at the balance sheet date. The fair values of these financial instruments are
\npresented in note 20.
\nGross contractual cash-flows for other financial liabilities
\nThe contractual cash-flows for financial liabilities included in trade and other payables were
\n\u00a3463m (FY2022: \u00a3474m) due in less than one year, \u00a313m (FY2022: \u00a313m) due between one and
\nfive years.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f24107": {
"value": "19. FINANCIAL RISK MANAGEMENT The Group\u2019s international operations and debt financing expose it to financial risks which include
\nthe effects of changes in foreign exchange rates, debt market prices, interest rates, credit risks
\nand liquidity risks. The management of operational credit risk is discussed in note 16.
\nTREASURY RISK MANAGEMENT POLICY
\nThe Board maintains a Treasury Risk Management Policy, which governs the treasury operations
\nof the Group and its subsidiary companies and the consolidated financial risk profile to be
\nmaintained. A report on treasury activities, financial metrics and compliance with the Policy is
\ncirculated to the Chief Financial Officer each month and key elements to the Audit & Risk
\nCommittee on a semi-annual basis.
\nThe Policy maintains a treasury control framework within which counterparty risk, financing
\nand\u00a0debt strategy, cash and liquidity, interest rate risk and currency translation management
\nare\u00a0reserved for Group Treasury, while currency transaction management is devolved to
\noperating divisions.
\nCentrally directed cash management systems exist globally to manage overall liquid resources
\nefficiently across the divisions. The Group uses financial instruments to raise financing for its
\nglobal operations, to manage related interest rate and currency financial risk, and to hedge
\ntransaction risk within subsidiary companies.
\nThe Group does not speculate in financial instruments. All financial instruments hedge existing
\nbusiness exposures and all are recognised on the balance sheet.
\nThe Policy defines four treasury risk components and for each component a set of financial
\nmetrics to be measured and reported monthly against pre-agreed objectives.
\n1) Credit quality
\nThe Group\u2019s strategy is to maintain a solid investment-grade rating to ensure access to the widest
\npossible sources of financing at the right time and to optimise the resulting cost of debt capital.
\nThe credit ratings at the end of July 2023 were BBB+ / Baa2 (both stable) from Standard & Poor\u2019s
\nand Moody\u2019s respectively. An essential element of an investment-grade rating is consistent and
\nrobust cash-flow metrics. The Group\u2019s objective is to maintain a net debt/headline EBITDA ratio of
\ntwo times or lower over the medium term. Capital management is discussed in more detail in
\nnote 26.
\n2) Debt and interest rate
\nThe Group\u2019s risk management objectives are to ensure that the majority of funding is drawn from
\nthe public debt markets with the average maturity profile of gross debt to be at or greater than
\nthree years, and between 40-60% of gross debt (excluding leases) is at fixed rates. At 31 July 2023
\nthese measures were 100% (FY2022: 100%), 3.6 years (FY2022: 2.7 years) and 54% (FY2022: 44%).
\n
\n
\n
The Group has no financial covenants in its external debt agreements. Interest rate risk
\nmanagement is discussed in note 19(b).
\n3) Liquidity management
\nThe Group\u2019s objective is to ensure that at any time undrawn committed facilities, net of short-
\nterm overdraft financing, are at least \u00a3300m and that committed facilities have at least 12 months
\nto run until maturity. At 31 July 2023, these measures were \u00a3622m (FY2022: \u00a3657m) and 57
\nmonths (FY2022: 27 months). At 31 July 2023, net cash resources were \u00a3285m (FY2022: \u00a31,055m).
\nLiquidity risk management is discussed in note 19(d).
\n4) Currency management
\nThe Group is an international business with the majority of its net assets denominated in foreign
\ncurrency. It protects the balance sheet and reserves from adverse foreign exchange movements
\nby financing foreign currency assets where appropriate in the same currency. The Group\u2019s
\nobjective for managing transaction currency exposure is to reduce medium-term volatility to
\ncash-flow, margins and earnings. Foreign exchange risk management is discussed in note 19(a)
\nbelow.
\n(A) FOREIGN EXCHANGE RISK
\nTransactional currency exposure
\nThe Group is exposed to foreign currency risks arising from sales or purchases by businesses in
\ncurrencies other than their functional currency. It is Group policy that, when the net foreign
\nexchange exposure to known future sales and purchases is material, this exposure is hedged
\nusing forward foreign exchange contracts. The net exposure is calculated by adjusting the
\nexpected cash-flow for payments or receipts in the same currency linked to the sale or purchase.
\nThis policy minimises the risk that the profits generated from the transaction will be affected by
\nforeign exchange movements which occur after the price has been determined. Hedge accounting
\ndocumentation and effectiveness testing are only undertaken if it is cost-effective.
\nThe following table shows the currency of financial instruments. It excludes loans and derivatives
\ndesignated as net investment hedges.
\nAt 31 July 2023
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
43
372
127
184
726
\nFinancial instruments included in trade and
\nother payables
(64)
(216)
(93)
(103)
(476)
\nCash and cash equivalents
50
115
29
91
285
\nBorrowings not designated as net investment
\nhedges
(27)
(54)
(12)
(24)
(117)
\n2
217
51
148
418
\nExclude balances held in operations with the
\nsame functional currency.
(7)
(287)
(57)
(153)
(504)
\nExposure arising from intra-Group loans
\u2013
127
28
(73)
82
\nFuture forward foreign exchange contract
\ncash-flows
(63)
(23)
(48)
133
(1)
\n(68)
34
(26)
55
(5)
\nAt 31 July 2022
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
41
423
114
169
747
\nFinancial instruments included in trade and
\nother payables
(52)
(239)
(98)
(101)
(490)
\nCash and cash equivalents
355
506
74
120
1,055
\nBorrowings not designated as net investment
\nhedges
(28)
(58)
(14)
(19)
(119)
\n316
632
76
169
1,193
\nExclude balances held in operations with the
\nsame functional currency.
(322)
(149)
(80)
(142)
(693)
\nExposure arising from intra-Group loans
\u2013
(419)
(27)
(89)
(535)
\nFuture forward foreign exchange contract
\ncash-flows
(42)
(40)
(38)
120
\u2013
\n(48)
24
(69)
58
(35)
\nFinancial instruments included in trade and other receivables comprise trade receivables,
\naccrued income and other receivables which qualify as financial instruments. Similarly, financial
\ninstruments included in trade and other payables comprise trade payables, accrued expenses
\nand other payables that qualify as financial instruments.
\n
\n
\n
Based on the assets and liabilities held at the year-end, if the specified currencies were to
\nstrengthen 10% while all other market rates remained constant, the change in the fair value of
\nfinancial instruments not designated as net investment hedges would have the following\u00a0effect:
\nImpact on
\nprofit
\nfor the year
\nFY2023
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2023
\n\u00a3m
\nImpact on
\nprofit
\nfor the year
\nFY2022
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2022
\n\u00a3m
\nUS dollar
\u2013
1
(3)
1
\nEuro
1
\u2013
8
(1)
\nSterling
\u2013
(1)
4
\u2013
\nThese sensitivities were calculated before adjusting for tax and exclude the effect of quasi-equity
\nintra-Group loans.
\nCash-flow hedging
\nThe Group uses forward foreign exchange contracts to hedge future foreign currency sales and
\npurchases. At 31 July 2023, contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) were
\ndesignated as hedging instruments. In addition, the Group had outstanding foreign currency
\ncontracts with a nominal value of \u00a3252m (FY2022: \u00a3226m) which were being used to manage
\ntransactional foreign exchange exposures, but were not accounted for as cash-flow hedges. The
\nfair value of the contracts is disclosed in note 20.
\nThe majority of hedged transactions will be recognised in the consolidated income statement in
\nthe same period that the cash-flows are expected to occur, with the only differences arising
\nbecause of normal commercial credit terms on sales and purchases. It is the Group\u2019s policy to
\nhedge 80% of certain exposures for the next two years and 50% of highly probable exposures for
\nthe next 12 months.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The foreign exchange forward contracts have similar
\ncritical terms to the hedged items, such as the notional amounts and maturities. Therefore, there
\nis an economic relationship and the hedge ratio is established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\nGroup\u2019s and the counterparty credit risks on the fair value of the foreign exchange forward
\ncontracts, which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs. Of the foreign exchange contracts designated
\nas hedging instruments, 98% are for periods of 12 months or less (FY2022: 98%).
\nThe following table presents a reconciliation by risk category of the cash-flow hedge reserve and
\nanalysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward cash-flow hedge reserve at start of year
(3)
2
\nForeign exchange forward contracts:
Net fair value gains on effective hedges
1
(6)
\nAmount reclassified to income statement
\n\u2013 finance costs
2
1
\nCarried forward cash-flow hedge reserve at end of year
\u2013
(3)
\nThe following tables set out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the cash-flow hedge reserve:
\nHedged item
Hedged exposure
Hedging instrument
\nFinancial
\nyear
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCash-flow hedge
\nreserve
\n\u00a3m
\nSales and
\npurchases
\nForeign
\ncurrency risk
\nForeign exchange
\ncontracts
\nFY2023
1
(1)
1
\nFY2022
(6)
6
(6)
\nCash-flow hedges generated \u00a3nil of ineffectiveness in FY2023 (FY2022: \u00a3nil) which was
\nrecognised in the income statement through finance costs.
\nTranslational currency exposure
\nThe Group has significant investments in overseas operations, particularly in the US and Europe.\u00a0As
\na result, the sterling value of the Group\u2019s balance sheet can be significantly affected by\u00a0movements
\nin exchange rates. The Group seeks to mitigate the effect of these translational currency exposures
\nby matching the net investment in overseas operations with borrowings denominated in their
\nfunctional currencies, except where significant adverse interest differentials or other factors would
\nrender the cost of such hedging activity uneconomic. This is achieved by borrowing primarily in the
\nrelevant currency or in some cases indirectly using cross-currency swaps.
\nNet investment hedges
\nThe table below sets out the currency of loans and swap contracts designated as net investment
\nhedges:
\nAt 31 July 2023
At 31 July 2022
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nLoans designated as net
\ninvestment hedges
\u2013
(293)
(293)
\u2013
(451)
(451)
\nCross-currency swap
(247)
\u2013
(247)
(615)
\u2013
(615)
\n(247)
(293)
(540)
(615)
(451)
(1,066)
\n
\n
\n
At 31 July 2023, cross-currency swaps hedged the Group\u2019s exposure to US dollars and euros
\n(31\u00a0July 2022: US dollars and euros). All the cross-currency swaps designated as net investment
\nhedges were non-current (FY2022: current and non-current). Swaps generating \u00a3247m of the US
\ndollar exposure (FY2022: \u00a3261m) will mature in February 2027.
\nIn addition, non-swapped borrowings were also used to hedge the Group\u2019s exposure to euros
\n(31\u00a0July 2022: US dollars and euros). Borrowings generating \u00a3293m of the euro exposure
\n(FY2022: \u00a3287m) will mature in February\u00a02027.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The swaps and borrowings have the same notional
\namount as the hedged items and, therefore, there is an economic relationship with the hedge
\nratio established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\ncounterparty and the Group\u2019s own credit risk on the fair value of the foreign exchange forward
\ncontracts which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs.
\nThe following table presents a reconciliation by risk category of the net investment hedge reserve
\nand analysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward net investment hedge reserve at start of year
(207)
(238)
\nCross-currency swaps *
Net fair value gains on effective hedges
40
(77)
\nBonds
Net fair value gains on effective hedges
(29)
5
\nAmounts removed from the hedge
\nreserve and recognised in the income
\nstatement
Profit/(loss) on business disposal
\u2013
103
\nCarried forward net investment hedge reserve at end of year
(196)
(207)
\n*
The FY2022 reported amount for net fair value losses on effective hedges of cross-currency swaps was incorrectly
\npresented as \u00a382m rather than \u00a377m. The total reserve balances and net assets for FY2022 are not impacted by the
\ncorrection to this table.
\nThe following table sets out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the net investment hedge reserve as
\nat 31 July 2022 and 31 July 2021:
\nHedged item
Hedged exposure
Hedging instrument
Financial year
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nNet investment
\nhedge\u00a0reserve
\n\u00a3m
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2023
(40)
40
40
\nBonds
FY2023
29
(29)
(29)
\n(11)
11
11
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2022
82
(82)
(82)
\nBonds
FY2022
(5)
5
5
\n77
(77)
(77)
\nNet investment hedges generated \u00a31m of ineffectiveness in FY2022 (FY2022: \u00a31m) which was
\nrecognised in the income statement through finance costs.
\nThe fair values of these net investment hedges are subject to exchange rate movements.
\nBased\u00a0on the hedging instruments in place at\u00a0the\u00a0year-end, if the specified currencies
\nwere\u00a0to\u00a0strengthen 10% while all other market rates remained constant, it would have the
\nfollowing effect:
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2023
\n\u00a3m
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2022
\n\u00a3m
\nUS dollar
27
68
\nEuro
33
50
\nThese movements would be fully offset by an opposite movement on the retranslation of the net
\nassets of the overseas subsidiaries. These sensitivities were calculated before adjusting for tax.
\n(B) INTEREST RATE RISK
\nThe Group operates an interest rate policy designed to optimise interest cost and reduce volatility
\nin reported earnings. The Group\u2019s current policy is to require interest rates to be fixed within a band
\nof between 40% and 60 % of the level of gross debt (excluding leases). This is achieved through fixed
\nrate borrowings and interest rate swaps. At 31 July 2023 54% (FY2022: 44%) of the Group\u2019s gross
\nborrowings (excluding leases) were at fixed interest rates, after adjusting for interest rate swaps
\nand the impact of short maturity derivatives designated as net investment hedges.
\nThe Group monitors its fixed rate risk profile against both gross and net debt. For medium-term
\nplanning, it focuses on gross debt to eliminate the fluctuations of variable cash levels over the
\ncycle. The weighted average interest rate on borrowings and cross-currency swaps at 31 July
\n2023, after interest rate swaps, was 4.53% (FY2022: 3.06%).
\n
\n
\n
Interest rate profile of financial assets and liabilities and the fair value of borrowings
\nThe following table shows the interest rate risk exposure of investments, cash and borrowings,
\nwith the borrowings adjusted for the impact of interest rate hedging. Other financial assets and
\nliabilities do not earn or bear interest, and for all financial instruments except borrowings, the
\ncarrying value is not materially different from their fair value.
\nAs at 31 July 2023
\nAt fair value
\nthrough
\nprofit or loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(29)
(29)
\nBetween one and five years
\u2013
\u2013
(365)
(347)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(418)
(400)
\nFloating rate interest financial assets/(liabilities)
4
215
(236)
(240)
\nTotal interest-bearing financial assets/(liabilities)
4
215
(654)
(640)
\nNon-interest-bearing assets in the same category
\u2013
70
\u2013
\u2013
\nTotal
4
285
(654)
(640)
\nAs at 31 July 2022
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nCash and
\ncash
\nequivalents
\n\u00a3m
\nBorrowings
\n\u00a3m
\nFair value of
\nborrowings
\n\u00a3m
\nFixed interest
\nLess than one year
\u2013
\u2013
(203)
(203)
\nBetween one and five years
\u2013
\u2013
(357)
(359)
\nGreater than five years
\u2013
\u2013
(24)
(24)
\nTotal fixed interest financial liabilities
\u2013
\u2013
(584)
(586)
\nFloating rate interest financial assets/(liabilities)*
4
970
(582)
(586)
\nTotal interest-bearing financial assets/(liabilities)
4
970
(1,166)
(1,172)
\nNon-interest-bearing assets in the same category
\u2013
86
\u2013
\u2013
\nTotal
4
1,056
(1,166)
(1,172)
\n*
Floating rate interest financial assets in the prior year have been amended to remove the investments in ICU Medical
\nInc., contingent consideration and investments in early-stage business that were incorrectly reported as having
\ninterest rate exposure.
\nInterest rate hedging
\nThe Group also has exposures to the fair values of non-derivative financial instruments such as
\nEUR fixed rate borrowings. To manage the risk of changes in these fair values, the Group has
\nentered into fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which
\nfor accounting purposes are designated as fair value hedges.
\nAt 31 July 2023 and 31 July 2022, the Group had designated the following hedges against
\nvariability in the fair value of borrowings arising from fluctuations in base rates:
\n\u2013
\u20ac300m of the fixed/floating and \u20ac exchange exposure of EUR/USD interest rate swaps
\nmaturing on 23 February 2027 partially hedging the \u20ac 2027 Eurobond; and
\n\u2013
\u20ac400m of the fixed/floating element of the EUR/USD interest rate swaps that partially hedged
\nthe \u20ac 2023 Eurobond was repaid on 28 April 2022.
\nThe fair values of the hedging instruments are disclosed in note 20. The effect of the swaps was to
\nconvert \u00a3257m (FY2022: \u00a3588m) debt from fixed rate to floating rate. The swaps have similar
\ncritical terms to the hedged items, such as the reference rate, reset dates, notional amounts,
\npayment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is
\nestablished as 1:1. Hedge effectiveness is determined at the inception of the hedge relationship,
\nand through periodic prospective effectiveness assessments to ensure that an economic
\nrelationship exists between the hedged item and hedging instrument.
\nThe main source of hedge ineffectiveness in these hedging relationships is the effect of the
\ncurrency basis risk on cross-currency interest rate swaps which are not reflected in the fair value
\nof the hedged item. No other sources of ineffectiveness emerged from these hedging
\nrelationships. Any hedge ineffectiveness was recognised immediately in the income statement in
\nthe period in which it occurred.
\n
\n
\n
The following table sets out the details of the hedged exposures covered by the Group\u2019s fair value hedges:
\nHedged item
Hedged exposure
Financial year
\nChanges in value
\nof hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCarrying amount
\nAccumulated fair value
\nadjustments on hedged item
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nFixed rate bonds (a)
\nInterest rate risk
FY2023
(2)
2
\u2013
\u2013
\u2013
\u2013
\nInterest rate & currency rate risk
FY2023
16
(16)
\u2013
233
\u2013
(21)
\n14
(14)
\u2013
233
\u2013
(21)
\nFixed rate bonds (a)
\nInterest rate risk
FY2022
8
(8)
\u2013
336
\u2013
(2)
\nInterest rate & currency rate risk
FY2022
21
(20)
\u2013
252
\u2013
(5)
\n29
(28)
\u2013
588
\u2013
(7)
\n(a) Classified as borrowings.
\nFair value hedges generated a \u00a3nil ineffectiveness in FY2023 (FY2022: \u00a31m) which was recognised
\nin the income statement through finance costs.
\nSensitivity of interest charges to interest rate movements
\nThe Group has exposure to sterling, US dollar and euro interest rates. However, the Group does
\nnot have a significant exposure to interest rate movements for any individual currency. Based on
\nthe composition of net debt and investments at 31 July 2023, and taking into consideration all fixed
\nrate borrowings and interest rate swaps in place, a one percentage point (100 basis points)
\nchange in average floating interest rates for all three currencies would have a \u00a32m impact
\n(FY2022: \u00a32m impact) on the Group\u2019s profit before tax.
\n(C) FINANCIAL CREDIT RISK
\nThe Group is exposed to credit-related losses in the event of non-performance by counterparties
\nto financial instruments, but does not currently expect any counterparties to fail to meet their
\nobligations. Credit risk is mitigated by the Board-approved policy of only placing cash deposits
\nwith highly rated relationship bank counterparties within counterparty limits established by
\nreference to their Standard & Poor\u2019s long-term debt rating. In the normal course of business, the
\nGroup operates cash pooling systems, where a legal right of set-off applies.
\nThe maximum credit risk exposure in the event of other parties failing to perform their obligations
\nunder financial assets, excluding trade and other receivables and derivatives, totals \u00a3295m at 31
\nJuly 2023 (FY2022: \u00a31,067m).
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash in AAA liquidity funds
78
551
\nCash at banks with at least a AA- credit rating
31
104
\nCash at banks with all other A credit ratings
170
397
\nCash at other banks
6
4
\nInvestments in bank deposits
4
4
\nOther investments
7
7
\n296
1,067
\nAt 31 July 2023, the maximum exposure with a single bank for deposits and cash was \u00a365m
\n(FY2022: \u00a3339m). The bank has a credit rating of A+. The maximum mark to market exposure with
\na single bank for derivatives was out of the money in both the current and prior year and does not
\nrepresent a credit risk.
\n
\n
\n
(D) LIQUIDITY RISK
\nBorrowing facilities
\nBoard policy specifies the maintenance of unused committed credit facilities of at least \u00a3300m at
\nall times to ensure that the Group has sufficient available funds for operations and planned
\ndevelopment. The\u00a0Group has Revolving Credit Facilities of US$800m maturing 5 May 2028. At\u00a0the
\nbalance sheet date, the Group had the following undrawn credit facilities:
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nExpiring after more than four years (FY 2022: two years)
622
657
\nCash deposits
\nAs at 31 July 2023, \u00a3110m (FY2022: \u00a3814m) of cash and cash equivalents was on deposit with
\nvarious banks of which \u00a378m (FY2022: \u00a3558m) was in liquidity funds. \u00a34m (FY2022: \u00a34m) of
\ninvestments comprised bank deposits held to secure liabilities and letters of credit.
\nGross contractual cash-flows for borrowings
\nAs at 31 July 2023
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(29)
\u2013
(11)
(40)
\nBetween one and two years
(27)
\u2013
(11)
(38)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(13)
\u2013
(11)
(24)
\nBetween four and five years
(561)
21
\u2013
(540)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(674)
21
(44)
(697)
\nAs at 31 July 2022
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(539)
2
(17)
(554)
\nBetween one and two years
(23)
\u2013
(11)
(34)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(14)
\u2013
(11)
(25)
\nBetween four and five years
(552)
5
(11)
(558)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(1,172)
7
(61)
(1,226)
\nThe figures presented in the borrowings column include the non-cash adjustments which are
\nhighlighted in the adjacent column. The contractual interest reported for borrowings is before the
\neffect of interest rate swaps.
\nGross contractual cash-flows for derivative financial instruments
\nAs at 31 July 2023
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
209
(204)
5
\nGreater than one year
6
(6)
\u2013
\nLiabilities
\nLess than one year
159
(161)
(2)
\nGreater than one year
252
(270)
(18)
\nTotal
626
(641)
(15)
\nAs at 31 July 2022
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
495
(521)
(26)
\nGreater than one year
270
(290)
(20)
\nLiabilities
\nLess than one year
212
(209)
3
\nGreater than one year
8
(8)
\u2013
\nTotal
985
(1,028)
(43)
\nThis table above presents the undiscounted future contractual cash-flows for all derivative
\nfinancial instruments. For this disclosure, cash-flows in foreign currencies are translated using
\nthe spot rates at the balance sheet date. The fair values of these financial instruments are
\npresented in note 20.
\nGross contractual cash-flows for other financial liabilities
\nThe contractual cash-flows for financial liabilities included in trade and other payables were
\n\u00a3463m (FY2022: \u00a3474m) due in less than one year, \u00a313m (FY2022: \u00a313m) due between one and
\nfive years.
\n
\n
\n
20. DERIVATIVE FINANCIAL INSTRUMENTS
\nThe tables below set out the nominal amount and fair value of derivative contracts held by the
\nGroup, identifying the derivative contracts which qualify for hedge accounting treatment.
\nAt 31 July 2023
\nContract or
\nunderlying
\nnominal
\namount
\n\u00a3m
\nFair value
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nNet
\n\u00a3m
\nForeign exchange contracts (cash-flow hedges)
123
1
(1)
\u2013
\nForeign exchange contracts (not hedge accounted)
252
4
(1)
3
\nTotal foreign exchange contracts
375
5
(2)
3
\nCross-currency swaps (fair value and net investment
\nhedges)
247
\u2013
(18)
(18)
\nTotal financial derivatives
622
5
(20)
(15)
\nBalance sheet entries:
\nNon-current
256
\u2013
(18)
(18)
\nCurrent
366
5
(2)
3
\nTotal financial derivatives
622
5
(20)
(15)
\nAt 31 July 2022
\nContract or
\nunderlying
\nnominal
\namount
\n\u00a3m
\nFair value
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nNet
\n\u00a3m
\nForeign exchange contracts (cash-flow hedges)
141
3
(5)
(2)
\nForeign exchange contracts (not hedge accounted)
226
1
(2)
(1)
\nTotal foreign exchange contracts
367
4
(7)
(3)
\nCross-currency swaps (fair value and net investment
\nhedges)
615
\u2013
(40)
(40)
\nTotal financial derivatives
982
4
(47)
(43)
\nBalance sheet entries:
\nNon-current
269
\u2013
(20)
(20)
\nCurrent
713
4
(27)
(23)
\nTotal financial derivatives
982
4
(47)
(43)
\nACCOUNTING FOR OTHER DERIVATIVE CONTRACTS
\nAny foreign exchange contracts which are not formally designated as hedges and tested are
\nclassified as \u2018held for trading\u2019 and not hedge\u00a0accounted.
\nNETTING
\nInternational Swaps and Derivatives Association (ISDA) master netting agreements are in place
\nwith derivative counterparties except for contracts traded on a dedicated international electronic
\ntrading platform used for operational foreign exchange hedging. Under these agreements if a
\ncredit event occurs, all outstanding transactions under the ISDA are terminated and only a single
\nnet amount per counterparty is payable in settlement of all transactions. The ISDA agreements
\ndo not meet the criteria for offsetting, since the offsetting is enforceable only if specific events
\noccur in the future, and there is no intention to settle the contracts on a net basis.
\nAssets
\n31 July 2023
\n\u00a3m
\nLiabilities
\n31 July 2023
\n\u00a3m
\nAssets
\n31 July 2022
\n\u00a3m
\nLiabilities
\n31 July 2022
\n\u00a3m
\nGross value of assets and liabilities
5
(20)
4
(47)
\nRelated assets and liabilities subject to master netting
\nagreements
(5)
5
(4)
4
\nNet exposure
\u2013
(15)
\u2013
(43)
\n
\n
\n
The maturity profile, average interest and foreign currency exchange rates of the hedging instruments used in the Group\u2019s hedging strategies are as follows:
\nHedged exposure
Hedging instrument
\nMaturity at 31 July 2023
Maturity at 31 July 2022
\nUp to
\none year
One to five years
\nMore than
\nfive years
\nUp to
\none year
One to five years
\nMore than
\nfive years
\nFair value hedges
\nInterest rate risk
Interest rate swaps \u2013 EUR
\u2013 Notional amount (\u00a3m)
\u2013
\u2013
\u2013
336
\u2013
\u2013
\n\u2013 Average spread over three-month EURIBOR
\u2013
\u2013
\u2013
1.015%
\u2013
\u2013
\nInterest rate/
\nforeign currency risk
\nCross-currency swaps (EUR:GBP)
\u2013 Notional amount (\u00a3m)
\u2013
254
\u2013
\u2013
254
\u2013
\n\u2013 Average exchange rate
\u2013
0.845
\u2013
\u2013
0.845
\u2013
\n\u2013 Average spread over three-month GBP
\nSONIA
\n\u2013
1.860%
\u2013
\u2013
1.860%
\u2013
\nNet investment hedges
\nForeign currency risk
Cross-currency swaps (EUR:USD)
\u2013 Notional amount (\u00a3m)
\u2013
\u2013
\u2013
354
\u2013
\u2013
\n\u2013 Average exchange rate
\u2013
\u2013
\u2013
1.0773
\u2013
\u2013
\nCross-currency swaps (GBP:USD)
\u2013 Notional amount (\u00a3m)
\u2013
247
\u2013
\u2013
261
\u2013
\n\u2013 Average exchange rate
\u2013
1..2534
\u2013
\u2013
1.2534
\u2013
\nCash-flow hedges
\nForeign currency risk
Foreign exchange contracts (EUR:GBP)
\u2013 Notional amount (\u00a3m)
41
8
\u2013
28
8
\u2013
\n\u2013 Average exchange rate
0.7842
0.8893
\u2013
0.8323
1.1676
\u2013
\nForeign exchange contracts (EUR:USD)
\u2013 Notional amount (\u00a3m)
30
\u2013
\u2013
77
\u2013
\u2013
\n\u2013 Average exchange rate
1.0939
\u2013
\u2013
4.1785
\u2013
\u2013
\nForeign exchange contracts (USD:GBP)
\u2013 Notional amount (\u00a3m)
18
\u2013
\u2013
16
\u2013
\u2013
\n\u2013 Average exchange rate
1.2269
\u2013
\u2013
1.3273
\u2013
\u2013
\nForeign exchange contracts (GBP:CZK)
\u2013 Notional amount (\u00a3m)
10
\u2013
\u2013
6
\u2013
\u2013
\n\u2013 Average exchange rate
27.7919
\u2013
\u2013
30.2988
\u2013
\u2013
\nForeign exchange contracts (EUR:AUD)
\u2013 Notional amount (\u00a3m)
7
\u2013
\u2013
6
\u2013
\u2013
\n\u2013 Average exchange rate
1.6603
\u2013
\u2013
1.5226
\u2013
\u2013
\nAt 31 July 2023, the Group had forward foreign exchange contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) designated as cash-flow hedges. These forward foreign exchange contracts are in relation
\nto sale and purchase of multiple currencies with varying maturities up to 19 September 2024. The largest single currency pairs are disclosed above and make up 100% of the notional hedged exposure. The
\nnotional and fair values of these foreign exchange forward derivatives are shown in the nominal amount and fair value of derivative contracts table on page 176.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfMarketRiskExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f24191": {
"value": "(A) FOREIGN EXCHANGE RISK Transactional currency exposure
\nThe Group is exposed to foreign currency risks arising from sales or purchases by businesses in
\ncurrencies other than their functional currency. It is Group policy that, when the net foreign
\nexchange exposure to known future sales and purchases is material, this exposure is hedged
\nusing forward foreign exchange contracts. The net exposure is calculated by adjusting the
\nexpected cash-flow for payments or receipts in the same currency linked to the sale or purchase.
\nThis policy minimises the risk that the profits generated from the transaction will be affected by
\nforeign exchange movements which occur after the price has been determined. Hedge accounting
\ndocumentation and effectiveness testing are only undertaken if it is cost-effective.
\nThe following table shows the currency of financial instruments. It excludes loans and derivatives
\ndesignated as net investment hedges.
\nAt 31 July 2023
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
43
372
127
184
726
\nFinancial instruments included in trade and
\nother payables
(64)
(216)
(93)
(103)
(476)
\nCash and cash equivalents
50
115
29
91
285
\nBorrowings not designated as net investment
\nhedges
(27)
(54)
(12)
(24)
(117)
\n2
217
51
148
418
\nExclude balances held in operations with the
\nsame functional currency.
(7)
(287)
(57)
(153)
(504)
\nExposure arising from intra-Group loans
\u2013
127
28
(73)
82
\nFuture forward foreign exchange contract
\ncash-flows
(63)
(23)
(48)
133
(1)
\n(68)
34
(26)
55
(5)
\nAt 31 July 2022
\nSterling
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nOther
\n\u00a3m
\nTotal
\n\u00a3m
\nFinancial assets and liabilities
\nFinancial instruments included in trade and
\nother receivables
41
423
114
169
747
\nFinancial instruments included in trade and
\nother payables
(52)
(239)
(98)
(101)
(490)
\nCash and cash equivalents
355
506
74
120
1,055
\nBorrowings not designated as net investment
\nhedges
(28)
(58)
(14)
(19)
(119)
\n316
632
76
169
1,193
\nExclude balances held in operations with the
\nsame functional currency.
(322)
(149)
(80)
(142)
(693)
\nExposure arising from intra-Group loans
\u2013
(419)
(27)
(89)
(535)
\nFuture forward foreign exchange contract
\ncash-flows
(42)
(40)
(38)
120
\u2013
\n(48)
24
(69)
58
(35)
\nFinancial instruments included in trade and other receivables comprise trade receivables,
\naccrued income and other receivables which qualify as financial instruments. Similarly, financial
\ninstruments included in trade and other payables comprise trade payables, accrued expenses
\nand other payables that qualify as financial instruments.
\n
\n
\n
Based on the assets and liabilities held at the year-end, if the specified currencies were to
\nstrengthen 10% while all other market rates remained constant, the change in the fair value of
\nfinancial instruments not designated as net investment hedges would have the following\u00a0effect:
\nImpact on
\nprofit
\nfor the year
\nFY2023
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2023
\n\u00a3m
\nImpact on
\nprofit
\nfor the year
\nFY2022
\n\u00a3m
\nGain/(loss)
\nrecognised in
\nreserves
\nFY2022
\n\u00a3m
\nUS dollar
\u2013
1
(3)
1
\nEuro
1
\u2013
8
(1)
\nSterling
\u2013
(1)
4
\u2013
\nThese sensitivities were calculated before adjusting for tax and exclude the effect of quasi-equity
\nintra-Group loans.
\nCash-flow hedging
\nThe Group uses forward foreign exchange contracts to hedge future foreign currency sales and
\npurchases. At 31 July 2023, contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) were
\ndesignated as hedging instruments. In addition, the Group had outstanding foreign currency
\ncontracts with a nominal value of \u00a3252m (FY2022: \u00a3226m) which were being used to manage
\ntransactional foreign exchange exposures, but were not accounted for as cash-flow hedges. The
\nfair value of the contracts is disclosed in note 20.
\nThe majority of hedged transactions will be recognised in the consolidated income statement in
\nthe same period that the cash-flows are expected to occur, with the only differences arising
\nbecause of normal commercial credit terms on sales and purchases. It is the Group\u2019s policy to
\nhedge 80% of certain exposures for the next two years and 50% of highly probable exposures for
\nthe next 12 months.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The foreign exchange forward contracts have similar
\ncritical terms to the hedged items, such as the notional amounts and maturities. Therefore, there
\nis an economic relationship and the hedge ratio is established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\nGroup\u2019s and the counterparty credit risks on the fair value of the foreign exchange forward
\ncontracts, which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs. Of the foreign exchange contracts designated
\nas hedging instruments, 98% are for periods of 12 months or less (FY2022: 98%).
\nThe following table presents a reconciliation by risk category of the cash-flow hedge reserve and
\nanalysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward cash-flow hedge reserve at start of year
(3)
2
\nForeign exchange forward contracts:
Net fair value gains on effective hedges
1
(6)
\nAmount reclassified to income statement
\n\u2013 finance costs
2
1
\nCarried forward cash-flow hedge reserve at end of year
\u2013
(3)
\nThe following tables set out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the cash-flow hedge reserve:
\nHedged item
Hedged exposure
Hedging instrument
\nFinancial
\nyear
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nCash-flow hedge
\nreserve
\n\u00a3m
\nSales and
\npurchases
\nForeign
\ncurrency risk
\nForeign exchange
\ncontracts
\nFY2023
1
(1)
1
\nFY2022
(6)
6
(6)
\nCash-flow hedges generated \u00a3nil of ineffectiveness in FY2023 (FY2022: \u00a3nil) which was
\nrecognised in the income statement through finance costs.
\nTranslational currency exposure
\nThe Group has significant investments in overseas operations, particularly in the US and Europe.\u00a0As
\na result, the sterling value of the Group\u2019s balance sheet can be significantly affected by\u00a0movements
\nin exchange rates. The Group seeks to mitigate the effect of these translational currency exposures
\nby matching the net investment in overseas operations with borrowings denominated in their
\nfunctional currencies, except where significant adverse interest differentials or other factors would
\nrender the cost of such hedging activity uneconomic. This is achieved by borrowing primarily in the
\nrelevant currency or in some cases indirectly using cross-currency swaps.
\nNet investment hedges
\nThe table below sets out the currency of loans and swap contracts designated as net investment
\nhedges:
\nAt 31 July 2023
At 31 July 2022
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nUS$
\n\u00a3m
\nEuro
\n\u00a3m
\nTotal
\n\u00a3m
\nLoans designated as net
\ninvestment hedges
\u2013
(293)
(293)
\u2013
(451)
(451)
\nCross-currency swap
(247)
\u2013
(247)
(615)
\u2013
(615)
\n(247)
(293)
(540)
(615)
(451)
(1,066)
\n
\n
\n
At 31 July 2023, cross-currency swaps hedged the Group\u2019s exposure to US dollars and euros
\n(31\u00a0July 2022: US dollars and euros). All the cross-currency swaps designated as net investment
\nhedges were non-current (FY2022: current and non-current). Swaps generating \u00a3247m of the US
\ndollar exposure (FY2022: \u00a3261m) will mature in February 2027.
\nIn addition, non-swapped borrowings were also used to hedge the Group\u2019s exposure to euros
\n(31\u00a0July 2022: US dollars and euros). Borrowings generating \u00a3293m of the euro exposure
\n(FY2022: \u00a3287m) will mature in February\u00a02027.
\nHedge effectiveness is determined at the inception of the hedge relationship, and through periodic
\nprospective effectiveness assessments to ensure that an economic relationship exists between
\nthe hedged item and hedging instrument. The swaps and borrowings have the same notional
\namount as the hedged items and, therefore, there is an economic relationship with the hedge
\nratio established as 1:1.
\nThe main sources of hedge ineffectiveness in these hedging relationships are the effect of the
\ncounterparty and the Group\u2019s own credit risk on the fair value of the foreign exchange forward
\ncontracts which is not reflected in the fair value of the hedged item and the risk of over-hedging
\nwhere the hedge relationship requires re-balancing. No other sources of ineffectiveness
\nemerged from these hedging relationships. Any hedge ineffectiveness is recognised immediately
\nin the income statement in the period that it occurs.
\nThe following table presents a reconciliation by risk category of the net investment hedge reserve
\nand analysis of other comprehensive income in relation to hedge accounting:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nBrought forward net investment hedge reserve at start of year
(207)
(238)
\nCross-currency swaps *
Net fair value gains on effective hedges
40
(77)
\nBonds
Net fair value gains on effective hedges
(29)
5
\nAmounts removed from the hedge
\nreserve and recognised in the income
\nstatement
Profit/(loss) on business disposal
\u2013
103
\nCarried forward net investment hedge reserve at end of year
(196)
(207)
\n*
The FY2022 reported amount for net fair value losses on effective hedges of cross-currency swaps was incorrectly
\npresented as \u00a382m rather than \u00a377m. The total reserve balances and net assets for FY2022 are not impacted by the
\ncorrection to this table.
\nThe following table sets out information regarding the change in value of the hedged item used in
\ncalculating hedge ineffectiveness as well as the impacts on the net investment hedge reserve as
\nat 31 July 2022 and 31 July 2021:
\nHedged item
Hedged exposure
Hedging instrument
Financial year
\nChanges in value
\nof the hedged item
\nfor calculating
\nineffectiveness
\n\u00a3m
\nChanges in value
\nof the hedging
\ninstrument
\nfor calculating
\nineffectiveness
\n\u00a3m
\nNet investment
\nhedge\u00a0reserve
\n\u00a3m
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2023
(40)
40
40
\nBonds
FY2023
29
(29)
(29)
\n(11)
11
11
\nOverseas
\noperation
\nForeign
\ncurrency\u00a0risk
\nCross-currency
\nswaps
\nFY2022
82
(82)
(82)
\nBonds
FY2022
(5)
5
5
\n77
(77)
(77)
\nNet investment hedges generated \u00a31m of ineffectiveness in FY2022 (FY2022: \u00a31m) which was
\nrecognised in the income statement through finance costs.
\nThe fair values of these net investment hedges are subject to exchange rate movements.
\nBased\u00a0on the hedging instruments in place at\u00a0the\u00a0year-end, if the specified currencies
\nwere\u00a0to\u00a0strengthen 10% while all other market rates remained constant, it would have the
\nfollowing effect:
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2023
\n\u00a3m
\nLoss
\nrecognised
\nin hedge
\nreserve
\n31 July 2022
\n\u00a3m
\nUS dollar
27
68
\nEuro
33
50
\nThese movements would be fully offset by an opposite movement on the retranslation of the net
\nassets of the overseas subsidiaries. These sensitivities were calculated before adjusting for tax.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f25015": {
"value": "(C) FINANCIAL CREDIT RISK The Group is exposed to credit-related losses in the event of non-performance by counterparties
\nto financial instruments, but does not currently expect any counterparties to fail to meet their
\nobligations. Credit risk is mitigated by the Board-approved policy of only placing cash deposits
\nwith highly rated relationship bank counterparties within counterparty limits established by
\nreference to their Standard & Poor\u2019s long-term debt rating. In the normal course of business, the
\nGroup operates cash pooling systems, where a legal right of set-off applies.
\nThe maximum credit risk exposure in the event of other parties failing to perform their obligations
\nunder financial assets, excluding trade and other receivables and derivatives, totals \u00a3295m at 31
\nJuly 2023 (FY2022: \u00a31,067m).
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nCash in AAA liquidity funds
78
551
\nCash at banks with at least a AA- credit rating
31
104
\nCash at banks with all other A credit ratings
170
397
\nCash at other banks
6
4
\nInvestments in bank deposits
4
4
\nOther investments
7
7
\n296
1,067
\nAt 31 July 2023, the maximum exposure with a single bank for deposits and cash was \u00a365m
\n(FY2022: \u00a3339m). The bank has a credit rating of A+. The maximum mark to market exposure with
\na single bank for derivatives was out of the money in both the current and prior year and does not
\nrepresent a credit risk.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCreditRiskExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f25087": {
"value": "(D) LIQUIDITY RISK Borrowing facilities
\nBoard policy specifies the maintenance of unused committed credit facilities of at least \u00a3300m at
\nall times to ensure that the Group has sufficient available funds for operations and planned
\ndevelopment. The\u00a0Group has Revolving Credit Facilities of US$800m maturing 5 May 2028. At\u00a0the
\nbalance sheet date, the Group had the following undrawn credit facilities:
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nExpiring after more than four years (FY 2022: two years)
622
657
\nCash deposits
\nAs at 31 July 2023, \u00a3110m (FY2022: \u00a3814m) of cash and cash equivalents was on deposit with
\nvarious banks of which \u00a378m (FY2022: \u00a3558m) was in liquidity funds. \u00a34m (FY2022: \u00a34m) of
\ninvestments comprised bank deposits held to secure liabilities and letters of credit.
\nGross contractual cash-flows for borrowings
\nAs at 31 July 2023
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(29)
\u2013
(11)
(40)
\nBetween one and two years
(27)
\u2013
(11)
(38)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(13)
\u2013
(11)
(24)
\nBetween four and five years
(561)
21
\u2013
(540)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(674)
21
(44)
(697)
\nAs at 31 July 2022
\nBorrowings
\n\u00a3m
\nFair value
\nadjustments
\n\u00a3m
\nContractual
\ninterest
\npayments
\n\u00a3m
\nTotal
\ncontractual
\ncash-flows
\n\u00a3m
\nLess than one year
(539)
2
(17)
(554)
\nBetween one and two years
(23)
\u2013
(11)
(34)
\nBetween two and three years
(20)
\u2013
(11)
(31)
\nBetween three and four years
(14)
\u2013
(11)
(25)
\nBetween four and five years
(552)
5
(11)
(558)
\nGreater than five years
(24)
\u2013
\u2013
(24)
\nTotal
(1,172)
7
(61)
(1,226)
\nThe figures presented in the borrowings column include the non-cash adjustments which are
\nhighlighted in the adjacent column. The contractual interest reported for borrowings is before the
\neffect of interest rate swaps.
\nGross contractual cash-flows for derivative financial instruments
\nAs at 31 July 2023
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
209
(204)
5
\nGreater than one year
6
(6)
\u2013
\nLiabilities
\nLess than one year
159
(161)
(2)
\nGreater than one year
252
(270)
(18)
\nTotal
626
(641)
(15)
\nAs at 31 July 2022
\nReceipts
\n\u00a3m
\nPayments
\n\u00a3m
\nNet
\ncash-flow
\n\u00a3m
\nAssets
\nLess than one year
495
(521)
(26)
\nGreater than one year
270
(290)
(20)
\nLiabilities
\nLess than one year
212
(209)
3
\nGreater than one year
8
(8)
\u2013
\nTotal
985
(1,028)
(43)
\nThis table above presents the undiscounted future contractual cash-flows for all derivative
\nfinancial instruments. For this disclosure, cash-flows in foreign currencies are translated using
\nthe spot rates at the balance sheet date. The fair values of these financial instruments are
\npresented in note 20.
\nGross contractual cash-flows for other financial liabilities
\nThe contractual cash-flows for financial liabilities included in trade and other payables were
\n\u00a3463m (FY2022: \u00a3474m) due in less than one year, \u00a313m (FY2022: \u00a313m) due between one and
five years.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f25307": {
"value": "20. DERIVATIVE FINANCIAL INSTRUMENTS The tables below set out the nominal amount and fair value of derivative contracts held by the
\nGroup, identifying the derivative contracts which qualify for hedge accounting treatment.
\nAt 31 July 2023
\nContract or
\nunderlying
\nnominal
\namount
\n\u00a3m
\nFair value
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nNet
\n\u00a3m
\nForeign exchange contracts (cash-flow hedges)
123
1
(1)
\u2013
\nForeign exchange contracts (not hedge accounted)
252
4
(1)
3
\nTotal foreign exchange contracts
375
5
(2)
3
\nCross-currency swaps (fair value and net investment
\nhedges)
247
\u2013
(18)
(18)
\nTotal financial derivatives
622
5
(20)
(15)
\nBalance sheet entries:
\nNon-current
256
\u2013
(18)
(18)
\nCurrent
366
5
(2)
3
\nTotal financial derivatives
622
5
(20)
(15)
\nAt 31 July 2022
\nContract or
\nunderlying
\nnominal
\namount
\n\u00a3m
\nFair value
\nAssets
\n\u00a3m
\nLiabilities
\n\u00a3m
\nNet
\n\u00a3m
\nForeign exchange contracts (cash-flow hedges)
141
3
(5)
(2)
\nForeign exchange contracts (not hedge accounted)
226
1
(2)
(1)
\nTotal foreign exchange contracts
367
4
(7)
(3)
\nCross-currency swaps (fair value and net investment
\nhedges)
615
\u2013
(40)
(40)
\nTotal financial derivatives
982
4
(47)
(43)
\nBalance sheet entries:
\nNon-current
269
\u2013
(20)
(20)
\nCurrent
713
4
(27)
(23)
\nTotal financial derivatives
982
4
(47)
(43)
\nACCOUNTING FOR OTHER DERIVATIVE CONTRACTS
\nAny foreign exchange contracts which are not formally designated as hedges and tested are
\nclassified as \u2018held for trading\u2019 and not hedge\u00a0accounted.
\nNETTING
\nInternational Swaps and Derivatives Association (ISDA) master netting agreements are in place
\nwith derivative counterparties except for contracts traded on a dedicated international electronic
\ntrading platform used for operational foreign exchange hedging. Under these agreements if a
\ncredit event occurs, all outstanding transactions under the ISDA are terminated and only a single
\nnet amount per counterparty is payable in settlement of all transactions. The ISDA agreements
\ndo not meet the criteria for offsetting, since the offsetting is enforceable only if specific events
\noccur in the future, and there is no intention to settle the contracts on a net basis.
\nAssets
\n31 July 2023
\n\u00a3m
\nLiabilities
\n31 July 2023
\n\u00a3m
\nAssets
\n31 July 2022
\n\u00a3m
\nLiabilities
\n31 July 2022
\n\u00a3m
\nGross value of assets and liabilities
5
(20)
4
(47)
\nRelated assets and liabilities subject to master netting
\nagreements
(5)
5
(4)
4
\nNet exposure
\u2013
(15)
\u2013
(43)
\n
\n
\n
The maturity profile, average interest and foreign currency exchange rates of the hedging instruments used in the Group\u2019s hedging strategies are as follows:
\nHedged exposure
Hedging instrument
\nMaturity at 31 July 2023
Maturity at 31 July 2022
\nUp to
\none year
One to five years
\nMore than
\nfive years
\nUp to
\none year
One to five years
\nMore than
\nfive years
\nFair value hedges
\nInterest rate risk
Interest rate swaps \u2013 EUR
\u2013 Notional amount (\u00a3m)
\u2013
\u2013
\u2013
336
\u2013
\u2013
\n\u2013 Average spread over three-month EURIBOR
\u2013
\u2013
\u2013
1.015%
\u2013
\u2013
\nInterest rate/
\nforeign currency risk
\nCross-currency swaps (EUR:GBP)
\u2013 Notional amount (\u00a3m)
\u2013
254
\u2013
\u2013
254
\u2013
\n\u2013 Average exchange rate
\u2013
0.845
\u2013
\u2013
0.845
\u2013
\n\u2013 Average spread over three-month GBP
\nSONIA
\n\u2013
1.860%
\u2013
\u2013
1.860%
\u2013
\nNet investment hedges
\nForeign currency risk
Cross-currency swaps (EUR:USD)
\u2013 Notional amount (\u00a3m)
\u2013
\u2013
\u2013
354
\u2013
\u2013
\n\u2013 Average exchange rate
\u2013
\u2013
\u2013
1.0773
\u2013
\u2013
\nCross-currency swaps (GBP:USD)
\u2013 Notional amount (\u00a3m)
\u2013
247
\u2013
\u2013
261
\u2013
\n\u2013 Average exchange rate
\u2013
1..2534
\u2013
\u2013
1.2534
\u2013
\nCash-flow hedges
\nForeign currency risk
Foreign exchange contracts (EUR:GBP)
\u2013 Notional amount (\u00a3m)
41
8
\u2013
28
8
\u2013
\n\u2013 Average exchange rate
0.7842
0.8893
\u2013
0.8323
1.1676
\u2013
\nForeign exchange contracts (EUR:USD)
\u2013 Notional amount (\u00a3m)
30
\u2013
\u2013
77
\u2013
\u2013
\n\u2013 Average exchange rate
1.0939
\u2013
\u2013
4.1785
\u2013
\u2013
\nForeign exchange contracts (USD:GBP)
\u2013 Notional amount (\u00a3m)
18
\u2013
\u2013
16
\u2013
\u2013
\n\u2013 Average exchange rate
1.2269
\u2013
\u2013
1.3273
\u2013
\u2013
\nForeign exchange contracts (GBP:CZK)
\u2013 Notional amount (\u00a3m)
10
\u2013
\u2013
6
\u2013
\u2013
\n\u2013 Average exchange rate
27.7919
\u2013
\u2013
30.2988
\u2013
\u2013
\nForeign exchange contracts (EUR:AUD)
\u2013 Notional amount (\u00a3m)
7
\u2013
\u2013
6
\u2013
\u2013
\n\u2013 Average exchange rate
1.6603
\u2013
\u2013
1.5226
\u2013
\u2013
\nAt 31 July 2023, the Group had forward foreign exchange contracts with a nominal value of \u00a3123m (FY2022: \u00a3141m) designated as cash-flow hedges. These forward foreign exchange contracts are in relation
\nto sale and purchase of multiple currencies with varying maturities up to 19 September 2024. The largest single currency pairs are disclosed above and make up 100% of the notional hedged exposure. The
\nnotional and fair values of these foreign exchange forward derivatives are shown in the nominal amount and fair value of derivative contracts table on page 176.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f25686": {
"value": "21. FAIR VALUE OF FINANCIAL INSTRUMENTS As at 31 July 2023
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
347
351
351
\nOther investments
14
F
\u2013
13
7
20
20
\nCash and cash
\nequivalents
18
B
285
\u2013
\u2013
285
285
\nTrade and other
\nfinancial receivables
16
B/C
726
\u2013
\u2013
726
726
\nDerivative financial
\ninstruments
20
C
\u2013
5
\u2013
5
5
\nTotal financial
\nassets
1,011
22
354
1,387
1,387
\nFinancial liabilities
\nTrade and other
\nfinancial payables
B
(476)
\u2013
\u2013
(476)
(476)
\nShort-term
\nborrowings
18
B/D
(3)
\u2013
\u2013
(3)
(3)
\nLong-term
\nborrowings
18
E
(534)
\u2013
\u2013
(534)
(520)
\nLease liabilities
18
E
(117)
\u2013
\u2013
(117)
(117)
\nDerivative financial
\ninstruments
20
C
\u2013
(20)
\u2013
(20)
(20)
\nTotal financial
\nliabilities
(1,130)
(20)
\u2013
(1,150)
(1,136)
\nThe fair value of a financial instrument is the price at which an asset could be exchanged, or a
\nliability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. Fair
\nvalues have been determined with reference to available market information at the balance sheet
\ndate, using the methodologies described below:
\nA
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 1 as defined by IFRS 13).
\nB
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 2 as defined by IFRS 13).
\nC
Fair values of derivative financial assets and liabilities, and trade receivables held to collect or
\nsell are estimated by discounting expected future contractual cash-flows using prevailing
\ninterest rate curves. Amounts denominated in foreign currencies are valued at the exchange
\nrate prevailing at the balance sheet date. These financial instruments are included on the
\nbalance sheet at fair value, derived from observable market prices (Level 2 as defined by
\nIFRS\u00a013).
\nAs at 31 July 2022
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
364
368
368
\nOther investments
14
F
\u2013
19
8
27
27
\nCash and cash
\nequivalents
18
A
506
550
\u2013
1,056
1,056
\nTrade and other
\nfinancial receivables
16
B/C
807
\u2013
\u2013
807
807
\nDerivative financial
\ninstruments
20
C
\u2013
4
\u2013
4
4
\nTotal financial
\nassets
1,313
577
372
2,262
2,262
\nFinancial liabilities
\nTrade and other
\nfinancial payables
17
B
(728)
\u2013
\u2013
(728)
(728)
\nShort-term
\nborrowings
18
D
(509)
\u2013
\u2013
(509)
(509)
\nLong-term
\nborrowings
18
D
(538)
\u2013
\u2013
(538)
(544)
\nLease liabilities
18
E
(119)
\u2013
\u2013
(119)
(119)
\nDerivative financial
\ninstruments
20
C
\u2013
(47)
\u2013
(47)
(47)
\nTotal financial
\nliabilities
(1,894)
(47)
\u2013
(1,941)
(1,947)
\nD
Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are
\nvalued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is
\nestimated using quoted prices (Level 1 as defined by IFRS 13).
\nE
Leases are carried at amortised cost. Amounts denominated in foreign currencies are valued
\nat the exchange rate prevailing at the balance sheet date. The fair value of the lease contract is
\nestimated by discounting contractual future cash-flows (Level 2 as defined by IFRS 13).
\nF
The fair value of instruments is estimated by using unobservable inputs to the extent that
\nrelevant observable inputs are not available. Unobservable inputs are developed using the
\nbest information available in the circumstances, which may include the Group\u2019s own data,
\ntaking into account all information about market participation assumptions that is reliably
\navailable (Level 3 as defined by IFRS 13).
\nIFRS 13 defines a three-level valuation hierarchy:
\nLevel 1 \u2013 quoted prices for similar instruments
\nLevel 2 \u2013 directly observable market inputs other than Level 1 inputs
\nLevel 3 \u2013 inputs not based on observable market data",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f25687": {
"value": "21. FAIR VALUE OF FINANCIAL INSTRUMENTS As at 31 July 2023
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
347
351
351
\nOther investments
14
F
\u2013
13
7
20
20
\nCash and cash
\nequivalents
18
B
285
\u2013
\u2013
285
285
\nTrade and other
\nfinancial receivables
16
B/C
726
\u2013
\u2013
726
726
\nDerivative financial
\ninstruments
20
C
\u2013
5
\u2013
5
5
\nTotal financial
\nassets
1,011
22
354
1,387
1,387
\nFinancial liabilities
\nTrade and other
\nfinancial payables
B
(476)
\u2013
\u2013
(476)
(476)
\nShort-term
\nborrowings
18
B/D
(3)
\u2013
\u2013
(3)
(3)
\nLong-term
\nborrowings
18
E
(534)
\u2013
\u2013
(534)
(520)
\nLease liabilities
18
E
(117)
\u2013
\u2013
(117)
(117)
\nDerivative financial
\ninstruments
20
C
\u2013
(20)
\u2013
(20)
(20)
\nTotal financial
\nliabilities
(1,130)
(20)
\u2013
(1,150)
(1,136)
\nThe fair value of a financial instrument is the price at which an asset could be exchanged, or a
\nliability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. Fair
\nvalues have been determined with reference to available market information at the balance sheet
\ndate, using the methodologies described below:
\nA
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 1 as defined by IFRS 13).
\nB
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 2 as defined by IFRS 13).
\nC
Fair values of derivative financial assets and liabilities, and trade receivables held to collect or
\nsell are estimated by discounting expected future contractual cash-flows using prevailing
\ninterest rate curves. Amounts denominated in foreign currencies are valued at the exchange
\nrate prevailing at the balance sheet date. These financial instruments are included on the
\nbalance sheet at fair value, derived from observable market prices (Level 2 as defined by
\nIFRS\u00a013).
\nAs at 31 July 2022
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
364
368
368
\nOther investments
14
F
\u2013
19
8
27
27
\nCash and cash
\nequivalents
18
A
506
550
\u2013
1,056
1,056
\nTrade and other
\nfinancial receivables
16
B/C
807
\u2013
\u2013
807
807
\nDerivative financial
\ninstruments
20
C
\u2013
4
\u2013
4
4
\nTotal financial
\nassets
1,313
577
372
2,262
2,262
\nFinancial liabilities
\nTrade and other
\nfinancial payables
17
B
(728)
\u2013
\u2013
(728)
(728)
\nShort-term
\nborrowings
18
D
(509)
\u2013
\u2013
(509)
(509)
\nLong-term
\nborrowings
18
D
(538)
\u2013
\u2013
(538)
(544)
\nLease liabilities
18
E
(119)
\u2013
\u2013
(119)
(119)
\nDerivative financial
\ninstruments
20
C
\u2013
(47)
\u2013
(47)
(47)
\nTotal financial
\nliabilities
(1,894)
(47)
\u2013
(1,941)
(1,947)
\nD
Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are
\nvalued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is
\nestimated using quoted prices (Level 1 as defined by IFRS 13).
\nE
Leases are carried at amortised cost. Amounts denominated in foreign currencies are valued
\nat the exchange rate prevailing at the balance sheet date. The fair value of the lease contract is
\nestimated by discounting contractual future cash-flows (Level 2 as defined by IFRS 13).
\nF
The fair value of instruments is estimated by using unobservable inputs to the extent that
\nrelevant observable inputs are not available. Unobservable inputs are developed using the
\nbest information available in the circumstances, which may include the Group\u2019s own data,
\ntaking into account all information about market participation assumptions that is reliably
\navailable (Level 3 as defined by IFRS 13).
\nIFRS 13 defines a three-level valuation hierarchy:
\nLevel 1 \u2013 quoted prices for similar instruments
\nLevel 2 \u2013 directly observable market inputs other than Level 1 inputs
\nLevel 3 \u2013 inputs not based on observable market data",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f25688": {
"value": "21. FAIR VALUE OF FINANCIAL INSTRUMENTS As at 31 July 2023
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
347
351
351
\nOther investments
14
F
\u2013
13
7
20
20
\nCash and cash
\nequivalents
18
B
285
\u2013
\u2013
285
285
\nTrade and other
\nfinancial receivables
16
B/C
726
\u2013
\u2013
726
726
\nDerivative financial
\ninstruments
20
C
\u2013
5
\u2013
5
5
\nTotal financial
\nassets
1,011
22
354
1,387
1,387
\nFinancial liabilities
\nTrade and other
\nfinancial payables
B
(476)
\u2013
\u2013
(476)
(476)
\nShort-term
\nborrowings
18
B/D
(3)
\u2013
\u2013
(3)
(3)
\nLong-term
\nborrowings
18
E
(534)
\u2013
\u2013
(534)
(520)
\nLease liabilities
18
E
(117)
\u2013
\u2013
(117)
(117)
\nDerivative financial
\ninstruments
20
C
\u2013
(20)
\u2013
(20)
(20)
\nTotal financial
\nliabilities
(1,130)
(20)
\u2013
(1,150)
(1,136)
\nThe fair value of a financial instrument is the price at which an asset could be exchanged, or a
\nliability settled, between knowledgeable, willing parties in an arm\u2019s-length transaction. Fair
\nvalues have been determined with reference to available market information at the balance sheet
\ndate, using the methodologies described below:
\nA
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 1 as defined by IFRS 13).
\nB
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
\nand liabilities (Level 2 as defined by IFRS 13).
\nC
Fair values of derivative financial assets and liabilities, and trade receivables held to collect or
\nsell are estimated by discounting expected future contractual cash-flows using prevailing
\ninterest rate curves. Amounts denominated in foreign currencies are valued at the exchange
\nrate prevailing at the balance sheet date. These financial instruments are included on the
\nbalance sheet at fair value, derived from observable market prices (Level 2 as defined by
\nIFRS\u00a013).
\nAs at 31 July 2022
Notes
\nBasis for
\ndetermining
\nfair value
\nAt amortised
\ncost
\n\u00a3m
\nAt fair value
\nthrough profit
\nor loss
\n\u00a3m
\nAt fair value
\nthrough OCI
\n\u00a3m
\nTotal
\ncarrying
\nvalue
\n\u00a3m
\nTotal
\nfair value
\n\u00a3m
\nFinancial assets
\nOther investments
14
A
\u2013
4
364
368
368
\nOther investments
14
F
\u2013
19
8
27
27
\nCash and cash
\nequivalents
18
A
506
550
\u2013
1,056
1,056
\nTrade and other
\nfinancial receivables
16
B/C
807
\u2013
\u2013
807
807
\nDerivative financial
\ninstruments
20
C
\u2013
4
\u2013
4
4
\nTotal financial
\nassets
1,313
577
372
2,262
2,262
\nFinancial liabilities
\nTrade and other
\nfinancial payables
17
B
(728)
\u2013
\u2013
(728)
(728)
\nShort-term
\nborrowings
18
D
(509)
\u2013
\u2013
(509)
(509)
\nLong-term
\nborrowings
18
D
(538)
\u2013
\u2013
(538)
(544)
\nLease liabilities
18
E
(119)
\u2013
\u2013
(119)
(119)
\nDerivative financial
\ninstruments
20
C
\u2013
(47)
\u2013
(47)
(47)
\nTotal financial
\nliabilities
(1,894)
(47)
\u2013
(1,941)
(1,947)
\nD
Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are
\nvalued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is
\nestimated using quoted prices (Level 1 as defined by IFRS 13).
\nE
Leases are carried at amortised cost. Amounts denominated in foreign currencies are valued
\nat the exchange rate prevailing at the balance sheet date. The fair value of the lease contract is
\nestimated by discounting contractual future cash-flows (Level 2 as defined by IFRS 13).
\nF
The fair value of instruments is estimated by using unobservable inputs to the extent that
\nrelevant observable inputs are not available. Unobservable inputs are developed using the
\nbest information available in the circumstances, which may include the Group\u2019s own data,
\ntaking into account all information about market participation assumptions that is reliably
\navailable (Level 3 as defined by IFRS 13).
\nIFRS 13 defines a three-level valuation hierarchy:
\nLevel 1 \u2013 quoted prices for similar instruments
\nLevel 2 \u2013 directly observable market inputs other than Level 1 inputs
\nLevel 3 \u2013 inputs not based on observable market data",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26005": {
"value": "22. COMMITMENTS At 31 July 2023, commitments, comprising bonds and guarantees arising in the normal course of
\nbusiness, amounted to \u00a3207m (FY2022: \u00a3234m), including pension commitments of \u00a356m
\n(FY2022: \u00a356m) and charitable funding commitments for the Smiths Group Foundation of \u00a310m
\n(FY2022: Nil). In addition, the Group has committed expenditure on capital projects\u00a0amounting to
\n\u00a313m (FY2022: \u00a315m).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCommitmentsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26014": {
"value": "23. PROVISIONS AND CONTINGENT LIABILITIES Trading
Non-headline and legacy
Total
\n\u00a3m
\nJohn Crane,
\nInc.
\nlitigation
\n\u00a3m
\nTiteflex
\nCorporation
\nlitigation
\n\u00a3m
\nOther
\n\u00a3m
\u00a3m
\nAt 31 July 2021
11
212
47
17
287
\nForeign exchange rate movements
1
30
6
2
39
\nProvision charged
6
6
2
26
40
\nProvision released
(3)
\u2013
\u2013
\u2013
(3)
\nUnwind of provision discount
\u2013
2
1
\u2013
3
\nUtilisation
(4)
(21)
(4)
(2)
(31)
\nAt 31 July 2022
11
229
52
43
335
\nComprising:
\nCurrent liabilities
10
34
14
30
88
\nNon-current liabilities
1
195
38
13
247
\nAt 31 July 2022
11
229
52
43
335
\nForeign exchange rate movements
\u2013
(12)
(3)
\u2013
(15)
\nProvision charged
5
13
\u2013
18
36
\nProvision released
(4)
\u2013
(7)
(14)
(25)
\nUnwind of provision discount
\u2013
6
1
\u2013
7
\nUtilisation
(4)
(32)
(2)
(14)
(52)
\nAt 31 July 2023
8
204
41
33
286
\nComprising:
\nCurrent liabilities
6
27
13
24
70
\nNon-current liabilities
2
177
28
9
216
\nAt 31 July 2023
8
204
41
33
286
\nThe John Crane, Inc. and Titeflex Corporation litigation provisions were the only provisions that
\nwere discounted; other provisions have not been discounted as the impact would be immaterial.
\nTRADING
\nThe provisions included as trading represent amounts provided for in the ordinary course of
\nbusiness. Trading provisions are charged and released through headline profit.
\nWarranty provision and product liability
\nAt 31 July 2023, the Group had warranty and product liability provisions of \u00a36m (FY2022: \u00a37m).
\nWarranties over the Group\u2019s products typically cover periods of between one and three years.
\nProvision is made for the likely cost of after-sales support based on the recent past experience of
\nindividual businesses.
\nCommercial disputes and litigation in respect of ongoing business activities
\nThe Group has on occasion been required to take legal action to protect its intellectual property and
\nother rights against infringement. It has also had to defend itself against proceedings brought by
\nother parties, including product liability and insurance subrogation claims. Provision is made for any
\nexpected costs and liabilities in relation to these proceedings where appropriate, although there can
\nbe no guarantee that such provisions (which may be subject to potentially material revision from
\ntime to time) will accurately predict the actual costs and liabilities that may be incurred.
\nContingent liabilities
\nIn the ordinary course of its business, the Group is subject to commercial disputes and litigation
\nsuch as government price audits, product liability claims, employee disputes and other kinds of
\nlawsuits, and faces different types of legal issues in different jurisdictions. The high level of
\nactivity in the US, for example, exposes the Group to the likelihood of various types of litigation
\ncommonplace in that country, such as \u2018mass tort\u2019 and \u2018class action\u2019 litigation, legal challenges to
\nthe scope and validity of patents, and product liability and insurance subrogation claims. These
\ntypes of proceedings (or the threat of them) are also used to create pressure to encourage
\nnegotiated settlement of disputes. Any claim brought against the Group (with or without merit)
\ncould be costly to defend. These matters are inherently difficult to quantify. In appropriate cases a
\nprovision is recognised based on best estimates and management judgement but there can be no
\nguarantee that these provisions (which may be subject to potentially material revision from time
\nto time) will result in an accurate prediction of the actual costs and liabilities that may be incurred.
\nThere are also contingent liabilities in respect of litigation for which no provisions are made.
\nThe Group operates in some markets where the risk of unethical or corrupt behaviour is material
\nand has procedures, including an employee ethics alert line, to help it identify potential issues.
\nSuch procedures will, from time to time, give rise to internal investigations, sometimes conducted
\nwith external support, to ensure that the Group properly understands risks and concerns and
\ncan\u00a0take steps both to manage immediate issues and to improve its practices and procedures
\nfor\u00a0the future. The Group is not aware of any issues which are expected to generate material
\nfinancial exposures.
\n
\n
\n
NON-HEADLINE AND LEGACY
\nJohn Crane, Inc.
\nJohn Crane, Inc. (JCI) is one of many co-defendants in numerous lawsuits pending in the United
\nStates in which plaintiffs are claiming damages arising from alleged exposure to, or use of,
\nproducts previously manufactured which contained asbestos. Until 2006, the awards, the related
\ninterest and all material defence costs were met directly by insurers. In 2007, JCI secured the
\ncommutation of certain insurance policies in respect of product liability. Provision is made in
\nrespect of the expected costs of defending known and predicted future claims and of adverse
\njudgements in relation thereto, to the extent that such costs can be reliably estimated.
\nThe JCI products generally referred to in these cases consist of industrial sealing products,
\nprimarily packing and gaskets. The asbestos was encapsulated within these products in such a
\nmanner that causes JCI to understand, based on tests conducted on its behalf, that the products
\nwere safe. JCI ceased manufacturing products containing asbestos in 1985.
\nJCI continues to actively monitor the conduct and effect of its current and expected asbestos
\nlitigation, including the most efficacious presentation of its \u2018safe product\u2019 defence, and intends to
\ncontinue to resist these asbestos claims based upon this defence. The table below summarises
\nthe JCI claims experience over the last 40 years since the start of this litigation:
\nYear ended
\n31 July 2023
\nYear ended
\n31 July 2022
\nYear ended
\n31 July 2021
\nYear ended
\n31 July 2020
\nYear ended
\n31 July 2019
\nJCI claims experience
\nClaims against JCI that have been dismissed
310,000
306,000
305,000
297,000
285,000
\nClaims JCI is currently a defendant in
20,000
22,000
22,000
25,000
38,000
\nCumulative final judgements, after appeals,
\nagainst JCI since 1979
154
149
149
149
144
\nCumulative value of awards (US$m) since
\n1979
190
175
175
175
168
\nThe number of claims outstanding at 31 July 2023 reflected the benefit of 4,000 (FY2022: 1,000)
\nclaims being dismissed in the year.
\nJCI has also incurred significant additional defence costs. The litigation involves claims for a
\nnumber of allegedly asbestos-related diseases, with awards, when made, for mesothelioma
\ntending to be larger than those for the other diseases. JCI\u2019s ability to defend mesothelioma cases
\nsuccessfully is, therefore, likely to have a significant impact on its annual aggregate adverse
\njudgement and defence\u00a0costs.
\nJohn Crane, Inc. litigation provision
\nThe provision is based on past history of JCI claims and well-established tables of asbestos-
\nrelated disease incidence projections. The provision is determined using advice from asbestos
\nvaluation experts, Bates White LLC. The assumptions made in assessing the appropriate level of
\nprovision include: the period over which the expenditure can be reliably estimated; the future
\ntrend of legal costs; the rate of future claims filed; the rate of successful resolution of claims; and
\nthe average amount of judgements awarded. The provision utilised in the period is higher than
\nprevious periods, principally due to the resolution of outstanding verdicts from previous periods.
\nTrial delays arising from the COVID-19 pandemic have largely abated and trial activity has
\nreturned to pre-pandemic levels.
\nEstablished incidence curves can be used to estimate the likely future pattern of asbestos-related
\ndisease. However, JCI\u2019s claims experience is also significantly impacted by other factors which
\ninfluence the US litigation environment. These can include: changing approaches on the part of
\nthe plaintiffs\u2019 bar; changing attitudes amongst the judiciary at both trial and appellate levels in
\nspecific jurisdictions which move the balance of risk and opportunity for claimants; and legislative
\nand procedural changes in both the state and federal court systems.
\nThe projections use a limited time horizon on the basis that Bates White LLC consider that there
\nis substantial uncertainty in the asbestos litigation environment. So probable expenditures are
\nnot\u00a0reasonably estimable beyond this time horizon. Asbestos is the longest running mass tort
\nlitigation in American history and is constantly evolving in ways that cannot be anticipated. JCI\u2019s
\ndefence strategy also generates a significantly different pattern of legal costs and settlement
\nexpenses from other defendants. Thus JCI is in an extremely rare position, and evidence from
\nother litigation cannot be used to improve the reliability of the projections. A ten-year (FY2022:
\nten-year) time horizon has been used based on past experience regarding significant changes in
\nthe litigation environment that have occurred every few years and on the amount of time taken in
\nthe past for some of those changes to impact the broader asbestos litigation environment.
\nThe rate of future claims filed has been estimated using well-established tables of asbestos
\nincidence projections to determine the likely population of potential claimants, and JCI\u2019s past
\nexperience to determine what proportion of this population will make a claim against JCI. The JCI
\nproducts generally referred to in claims had industrial and marine applications. As a result, the
\nincidence curve used for JCI\u00a0projections excludes construction workers, and is a composite of the
\ncurves that predict asbestos exposure-related disease from shipyards and other occupations.
\nThis is consistent with JCI\u2019s litigation history.
\nThe rate of successful resolution of claims and the average amount of any judgements awarded
\nare projected based on the past history of JCI claims, since this is the best available evidence,
\ngiven JCI\u2019s unusual strategy of defending all claims.
\nThe future trend of legal costs is estimated based on JCI\u2019s past experience, adjusted to reflect the
\nassumed levels of claims and trial activity, since the number of trials is a key driver of legal costs.
\nJohn Crane, Inc. litigation insurance recoveries
\nWhile JCI has certain excess liability insurance, JCI has met defence costs directly. The
\ncalculation of the provision does not take account of any potential recoveries from insurers.
\nJohn Crane, Inc. litigation provision sensitivities
\nThe provision may be subject to potentially material revision from time to time if new information
\nbecomes available as a result of future events. There can be no guarantee that the assumptions
\nused to estimate the provision will result in an accurate prediction of the actual costs that will be
\nincurred because of the significant uncertainty associated with the future level of asbestos claims
\nand of the costs arising out of related litigation, including the unpredictability of jury verdicts.
\n
\n
\n
John Crane, Inc. statistical reliability of projections over the ten-year time horizon
\nIn order to evaluate the statistical reliability of the projections, a population of outcomes is
\nmodelled using randomised verdict outcomes. This generated a distribution of outcomes with
\nfuture spend at the 5th percentile of \u00a3180m and future spend at the 95th percentile of \u00a3245m
\n(FY2022: \u00a3203m and \u00a3268m, respectively). Statistical analysis of the distribution of these
\noutcomes indicates that there is a 50% probability that the total future spend will fall between
\n\u00a3228m and \u00a3257m (FY2022: between \u00a3239m and \u00a3263m), compared to the gross provision value
\nof \u00a3246m (FY2022: \u00a3258m).
\nJohn Crane, Inc. litigation provision history
\nThe JCI asbestos litigation provision of \u00a3204m (FY2022: \u00a3229m) is a discounted pre-tax provision
\nusing discount rates, being the risk-free rate on US debt instruments for the appropriate period.
\nThe deferred tax asset related to this provision is shown within the deferred tax balance (note 6).
\nThe JCI asbestos litigation provision has developed over the last five years as follows:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nYear ended
\n31 July 2021
\n\u00a3m
\nYear ended
\n31 July 2020
\n\u00a3m
\nYear ended
\n31 July 2019
\n\u00a3m
\nJohn Crane, Inc. litigation provision
\nGross provision
246
258
220
235
257
\nDiscount
(42)
(29)
(8)
(4)
(20)
\nDiscounted pre-tax provision
204
229
212
231
237
\nDeferred tax
(51)
(57)
(54)
(59)
(50)
\nDiscounted post-tax provision
153
172
158
172
187
\nOperating profit charge/(credit)
\nIncreased provisions for adverse judgements
\nand legal defence costs
28
24
10
14
7
\nChange in US risk-free rates
(15)
(18)
(5)
16
8
\nSubtotal \u2013 items charged to the provision
13
6
5
30
15
\nLitigation management, legal fees in
\nconnection with litigation against insurers and
\ndefence strategy
2
1
1
1
2
\nRecoveries from insurers
(7)
\u2013
(9)
(3)
(11)
\nTotal operating profit charge/(credit)
8
7
(3)
28
6
\nCash-flow
\nProvision utilisation \u2013 legal defence costs and
\nadverse judgements
(32)
(21)
(13)
(23)
(24)
\nLitigation management expense
(2)
(1)
\u2013
(1)
(2)
\nRecoveries from insurers
7
\u2013
9
3
11
\nNet cash outflow
(27)
(22)
(4)
(21)
(15)
\nJohn Crane, Inc. sensitivity of the projections to changes in the time horizon used
\nIf the asbestos litigation environment becomes more volatile and uncertain, the time horizon over
\nwhich the provision can be calculated may reduce. Conversely, if the environment became more
\nstable, or JCI changed approach and committed to long-term settlement arrangements, the time
\nperiod covered by the provision might be extended.
\nThe projections use a ten-year time horizon. Reducing the time horizon by one year would reduce
\nthe provision by \u00a316m (FY2022: \u00a318m) and reducing it by five years would reduce the provision by
\n\u00a387m (FY2022: \u00a397m).
\nWe consider, after obtaining advice from Bates White LLC, that to forecast beyond ten years
\nrequires that the litigation environment remains largely unchanged with respect to the historical
\nexperience used for estimating future asbestos expenditures. Historically, the asbestos litigation
\nenvironment has undergone significant changes more often than every ten years. If one assumed
\nthat the asbestos litigation environment would remain unchanged for longer and extended the
\ntime horizon by one year, it would increase the pre-tax provision by \u00a313m (FY2022: \u00a315m) and
\nextending it by five years would increase the pre-tax provision by \u00a348m (FY2022: \u00a356m).
\nHowever,\u00a0there are also reasonable scenarios that, given certain recent events in the US asbestos
\nlitigation environment, would result in no additional asbestos litigation for JCI beyond ten years.
\nAt this time, how the asbestos litigation environment will evolve beyond ten years is not
\nreasonably estimable.
\nJohn Crane, Inc. contingent liabilities
\nProvision has been made for future defence costs and the cost of adverse judgements expected to
\noccur. JCI\u2019s claims experience is significantly impacted by other factors which influence the US
\nlitigation environment. These can include: changing approaches on the part of the plaintiffs\u2019 bar;
\nchanging attitudes amongst the judiciary at both trial and appellate levels; and legislative and
\nprocedural changes in both the state and federal court systems. As a result, whilst the Group
\nanticipates that asbestos litigation will continue beyond the period covered by the provision, the
\nuncertainty surrounding the US litigation environment beyond this point is such that the costs cannot
\nbe reliably\u00a0estimated.
\nAlthough the methodology used to calculate the JCI litigation provision can in theory be applied to
\nshow claims and costs for longer periods, the Directors consider, based on advice from Bates
\nWhite LLC, that the level of uncertainty regarding the factors used in estimating future costs is
\ntoo great to provide for reasonable estimation of the numbers of future claims, the nature of such
\nclaims or the cost to resolve them for years beyond the ten-year time horizon.
\nTiteflex Corporation
\nTiteflex Corporation, a subsidiary of the Group in the Flex-Tek division, has received a number of
\nclaims in the US from insurance companies seeking recompense on a subrogated basis for the
\neffects of damage allegedly caused by lightning strikes in relation to its flexible gas piping
\nproduct. It has also received product liability claims regarding this product in the US, some in the
\nform of purported class actions. Titeflex Corporation believes that its products are a safe and
\neffective means of delivering gas when installed in accordance with the manufacturer\u2019s
\ninstructions and local and national codes. However, some claims have been settled on an
\nindividual basis without admission of liability. Equivalent third-party products in the US
\nmarketplace face similar challenges.
\n
\n
\n
Titeflex Corporation litigation provision
\nThe continuing progress of claims and the pattern of settlement, together with recent
\nmarketplace activity, provide sufficient evidence to recognise a liability in the accounts. Therefore
\nprovision has been made for the costs which the Group is expected to incur in respect of future
\nclaims to the extent that such costs can be reliably estimated. Titeflex Corporation sells flexible
\ngas piping with extensive installation and safety guidance designed to assure the safety of the
\nproduct and minimise the risk of damage associated with lightning strikes.
\nThe assumptions made in assessing the appropriate level of provision, which are based on past
\nexperience, include: the period over which expenditure can be reliably estimated; the number of
\nfuture settlements; the average amount of settlements; and the impact of statutes of repose and safe
\ninstallation initiatives on the expected number of future claims. The assumptions relating to the
\nnumber of future settlements exclude the use of recent claims history due to the uncertain impact
\nthat the COVID-19 lockdown has had on the number of claims.
\nThe provision of \u00a341m (FY2022: \u00a352m) is a discounted pre-tax provision using discount rates,
\nbeing the risk-free rate on US debt instruments for the appropriate period. The deferred tax asset
\nrelated to this provision is shown within the deferred tax balance (note 6).
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nGross provision
78
87
\nDiscount
(37)
(35)
\nDiscounted pre-tax provision
41
52
\nDeferred tax
(9)
(12)
\nDiscounted post-tax provision
32
40
\nTiteflex Corporation litigation provision history
\nA credit of \u00a38m (FY2022: \u00a32m charge) has been recognised by Titeflex Corporation in respect of
\nchanges to the estimated cost of future claims from insurance companies seeking recompense
\nfor damage allegedly caused by lightning strikes. The lower gross provision value has been
\nprincipally driven by an increase in the discount factor deriving from increasing US dollar
\ndiscount\u00a0rates.
\nTiteflex Corporation litigation provision sensitivities
\nThe significant uncertainty associated with the future level of claims and of the costs arising out of
\nrelated litigation means that there can be no guarantee that the assumptions used to estimate the
\nprovision will result in an accurate prediction of the actual costs that will be incurred. Therefore
\nthe provision may be subject to potentially material revision from time to time, if new information
\nbecomes available as a result of future events.
\nThe projections incorporate a long-term assumption regarding the impact of safe installation
\ninitiatives on the level of future claims. If the assumed annual benefit of bonding and grounding
\ninitiatives were 0.5% higher, the provision would be \u00a32m (FY2022: \u00a33m) lower, and if the benefit
\nwere 0.5% lower, the provision would be \u00a32m (FY2022: \u00a34m) higher.
\nThe projections use assumptions of future claims that are based on both the number of future
\nsettlements and the average amount of those settlements. If the assumed average number of
\nfuture settlements increased 10%, the provision would rise by \u00a33m (FY2022: \u00a35m), with an
\nequivalent fall for a reduction of 10%. If the assumed amount of those settlements increased 10%,
\nthe provision would rise by \u00a32m (FY2022: \u00a34m), also with an equivalent fall for a reduction of 10%.
\nOther non-headline and legacy provisions
\nNon-headline provisions comprise all provisions that were disclosed as non-headline items when
\nthey were charged to the consolidated income statement. Legacy provisions comprise non-material
\nprovisions relating to former business activities and discontinued operations and properties no
\nlonger used by Smiths.
\nThese non-material provisions include non-headline reorganisation, disposal indemnities,
\nlitigation and arbitration in respect of old products and discontinued business activities, which
\nincludes claims received in connection with the disposal of Smiths Medical in the prior year.
\nProvision is made for the best estimate of the expected expenditure related to the defence and/or
\nresolution of such matters. There is an inherent risk in legal proceedings that the outcome may
\nbe unfavourable to the Group, and as such there can be no guarantee that such provisions (which
\nmay be subject to potentially material revision from time to time) will be sufficient.
\nReorganisation
\nAt 31 July 2023, there were reorganisation provisions of \u00a37m (FY2022: \u00a31m) relating to the various
\nrestructuring programmes that are expected to be utilised in the next 18 months.
\nProperty
\nAt 31 July 2023, there were provisions of \u00a310m (FY2022: \u00a310m) related to actual and potential
\nenvironmental issues for sites currently or previously occupied by Smiths operations.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26643": {
"value": "24. SHARE CAPITAL Number of shares
\nAverage number
\nof shares
\nIssued
\ncapital
\n\u00a3m
\nConsideration
\n\u00a3m
\nOrdinary shares of 37.5p each
\nTotal share capital at 31 July 2021
396,377,114
396,350,586
149
\nIssue of new equity shares \u2013 exercise of
\nshare options
131,942
125,354
\u2013
2
\nShare buybacks
(34,152,897)
(9,797,729)
(13)
(511)
\nTotal share capital at 31 July 2022
362,356,159
386,678,211
136
\nShare buybacks
(13,053,169)
(32,555,024)
(5)
(207)
\nShares held in Employee Benefit Trust
\u2013
(1,232,067)
\nTotal share capital at 31 July 2023
349,302,990
352,891,120
131
\nSHARE CAPITAL STRUCTURE
\nAs at 31 July 2023, the Company\u2019s issued share capital was 349,302,990 ordinary shares with a
\nnominal value of 37.5p per share. All of the issued share capital was in free issue and all issued
\nshares are fully paid.
\nThe Company\u2019s ordinary shares are listed and admitted to trading on the Main Market of the
\nLondon Stock Exchange. The Company has an American Depositary Receipt (ADR) programme
\nand one ADR equates to one ordinary share. As at 31 July 2023, 3,335,964 ordinary shares were
\nheld by the nominee of the programme in respect of the same number of ADRs in issue.
\nThe holders of ordinary shares are entitled to receive the Company\u2019s Reports and Accounts, to
\nattend and speak at General Meetings of the\u00a0Company, to appoint proxies and to exercise voting
\nrights. None of the ordinary shares carry any special rights with regard to control of\u00a0the Company
\nor distributions made by the Company.
\nThere are no known agreements relating to, or restrictions on, voting rights attached to the
\nordinary shares (other than the 48-hour cut-off for casting proxy votes prior to a General
\nMeeting). There are no restrictions on the transfer of shares, and there is no requirement to
\nobtain approval for a share transfer. There are no known arrangements under which financial
\nrights are held by a person other than the holder of the ordinary shares. There are no known
\nlimitations on the holding of shares.
\nPOWERS OF DIRECTORS
\nThe Directors are authorised to issue and allot shares and to buy back shares subject to receiving
\nshareholder approval at the General Meeting. Such authorities were granted by shareholders at
\nthe 2022 Annual General Meeting. At the 2023 AGM, it will be proposed that the Directors be
\ngranted new authorities to allot and buy back shares.
\nSHARE BUYBACKS
\nAs at 15 September 2023 (the latest practicable date for inclusion in this report), the Company had
\nan unexpired authority to repurchase ordinary shares up to a maximum of 10.7 million ordinary
\nshares (FY2022: 59 million). As at 15 September 2023, the Company did not hold any shares in
\ntreasury. Any ordinary shares purchased may be cancelled or held in treasury.
\nIn connection with the sale of Smiths Medical to ICU Medical, Inc., and in the light of our strong
\nbalance sheet and cash-flows, the Group announced that it intended to return an amount
\nrepresenting 55% of the initial cash proceeds (equating to an aggregate purchase price of up to
\nUS$1bn or \u00a3742m) to shareholders in the form of a Share Buyback Programme. All shares
\npurchased under the Programme will be cancelled. This Programme was initiated on 19
\nNovember 2021 as announced to the London Stock Exchange on 11 November 2021 and following
\nshareholder approval at the General Meeting held on 17 November 2021.
\nA total number of 13,008,032 ordinary shares of 37.5p each were repurchased during the period,
\nfor a total consideration of \u00a3206,142,265, of which 84,195 shares with a value of \u00a31,430,464 were
\nyet to settle and be cancelled. In total since the start of the Programme, 47,290,261 shares have
\nbeen repurchased, for a total consideration of \u00a3718,939,264, representing 11.93% of the called-up
\nordinary share capital outstanding at the start of the Programme.
\nA further 1,379,697 ordinary shares have been repurchased during the period of 1 August
\n2023\u00a0to\u00a015 September 2023, bringing the total number of shares repurchased to 48,669,958.
\nAt\u00a015\u00a0September 2023, the Group had paid \u00a3737m of the expected \u00a3742m payable under the
\nProgramme, with the remaining \u00a35m expected to be utilised within the next two weeks.
\nEMPLOYMENT SHARE SCHEMES
\nShares acquired through Company share schemes and plans rank pari passu with the shares in
\nissue and have no special rights. The Company operates an Employee Benefit Trust, with an
\nindependent trustee, to hold shares pending employees becoming entitled to them under the
\nCompany\u2019s share schemes and plans. On 31 July 2023, the Trust held 1,742,929 (FY2022: 618,662)
\nordinary shares in the Company. The Trust waived its dividend entitlement on its holding during
\nthe year, and the Trust abstains from voting any shares held at General Meetings.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26644": {
"value": "24. SHARE CAPITAL Number of shares
\nAverage number
\nof shares
\nIssued
\ncapital
\n\u00a3m
\nConsideration
\n\u00a3m
\nOrdinary shares of 37.5p each
\nTotal share capital at 31 July 2021
396,377,114
396,350,586
149
\nIssue of new equity shares \u2013 exercise of
\nshare options
131,942
125,354
\u2013
2
\nShare buybacks
(34,152,897)
(9,797,729)
(13)
(511)
\nTotal share capital at 31 July 2022
362,356,159
386,678,211
136
\nShare buybacks
(13,053,169)
(32,555,024)
(5)
(207)
\nShares held in Employee Benefit Trust
\u2013
(1,232,067)
\nTotal share capital at 31 July 2023
349,302,990
352,891,120
131
\nSHARE CAPITAL STRUCTURE
\nAs at 31 July 2023, the Company\u2019s issued share capital was 349,302,990 ordinary shares with a
\nnominal value of 37.5p per share. All of the issued share capital was in free issue and all issued
\nshares are fully paid.
\nThe Company\u2019s ordinary shares are listed and admitted to trading on the Main Market of the
\nLondon Stock Exchange. The Company has an American Depositary Receipt (ADR) programme
\nand one ADR equates to one ordinary share. As at 31 July 2023, 3,335,964 ordinary shares were
\nheld by the nominee of the programme in respect of the same number of ADRs in issue.
\nThe holders of ordinary shares are entitled to receive the Company\u2019s Reports and Accounts, to
\nattend and speak at General Meetings of the\u00a0Company, to appoint proxies and to exercise voting
\nrights. None of the ordinary shares carry any special rights with regard to control of\u00a0the Company
\nor distributions made by the Company.
\nThere are no known agreements relating to, or restrictions on, voting rights attached to the
\nordinary shares (other than the 48-hour cut-off for casting proxy votes prior to a General
\nMeeting). There are no restrictions on the transfer of shares, and there is no requirement to
\nobtain approval for a share transfer. There are no known arrangements under which financial
\nrights are held by a person other than the holder of the ordinary shares. There are no known
\nlimitations on the holding of shares.
\nPOWERS OF DIRECTORS
\nThe Directors are authorised to issue and allot shares and to buy back shares subject to receiving
\nshareholder approval at the General Meeting. Such authorities were granted by shareholders at
\nthe 2022 Annual General Meeting. At the 2023 AGM, it will be proposed that the Directors be
\ngranted new authorities to allot and buy back shares.
\nSHARE BUYBACKS
\nAs at 15 September 2023 (the latest practicable date for inclusion in this report), the Company had
\nan unexpired authority to repurchase ordinary shares up to a maximum of 10.7 million ordinary
\nshares (FY2022: 59 million). As at 15 September 2023, the Company did not hold any shares in
\ntreasury. Any ordinary shares purchased may be cancelled or held in treasury.
\nIn connection with the sale of Smiths Medical to ICU Medical, Inc., and in the light of our strong
\nbalance sheet and cash-flows, the Group announced that it intended to return an amount
\nrepresenting 55% of the initial cash proceeds (equating to an aggregate purchase price of up to
\nUS$1bn or \u00a3742m) to shareholders in the form of a Share Buyback Programme. All shares
\npurchased under the Programme will be cancelled. This Programme was initiated on 19
\nNovember 2021 as announced to the London Stock Exchange on 11 November 2021 and following
\nshareholder approval at the General Meeting held on 17 November 2021.
\nA total number of 13,008,032 ordinary shares of 37.5p each were repurchased during the period,
\nfor a total consideration of \u00a3206,142,265, of which 84,195 shares with a value of \u00a31,430,464 were
\nyet to settle and be cancelled. In total since the start of the Programme, 47,290,261 shares have
\nbeen repurchased, for a total consideration of \u00a3718,939,264, representing 11.93% of the called-up
\nordinary share capital outstanding at the start of the Programme.
\nA further 1,379,697 ordinary shares have been repurchased during the period of 1 August
\n2023\u00a0to\u00a015 September 2023, bringing the total number of shares repurchased to 48,669,958.
\nAt\u00a015\u00a0September 2023, the Group had paid \u00a3737m of the expected \u00a3742m payable under the
\nProgramme, with the remaining \u00a35m expected to be utilised within the next two weeks.
\nEMPLOYMENT SHARE SCHEMES
\nShares acquired through Company share schemes and plans rank pari passu with the shares in
\nissue and have no special rights. The Company operates an Employee Benefit Trust, with an
\nindependent trustee, to hold shares pending employees becoming entitled to them under the
\nCompany\u2019s share schemes and plans. On 31 July 2023, the Trust held 1,742,929 (FY2022: 618,662)
\nordinary shares in the Company. The Trust waived its dividend entitlement on its holding during
\nthe year, and the Trust abstains from voting any shares held at General Meetings.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26766": {
"value": "25. DIVIDENDS The following dividends were declared and paid in the period:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nOrdinary final dividend of 27.3p (FY2022: 26.0p) paid 19 November 2022
97
103
\nOrdinary interim dividend of 12.9p (FY2022: 12.3p) paid 17 May 2023
46
47
\n143
150
\nIn the current year a total dividend of 40.2p has been paid, comprising a final dividend of 27.3p paid
\nin respect of FY2022 and an interim dividend of 12.9p paid in respect of FY2023. In the prior year a
\ntotal dividend of 38.3p was paid, comprising a final dividend of 26.0p paid in respect of FY2021 and
\nan interim dividend of 12.3p paid in respect of FY2022.
\nThe final dividend for the year ended 31 July 2023 of 28.7p per share was recommended by the
\nBoard on 21 September 2023 and will be paid to shareholders on 24 November 2023, subject to
\napproval by the shareholders. This dividend is payable to all shareholders on the register of
\nmembers at 6.00pm on 20 October 2023 (the record date).
\nWAIVER OF DIVIDENDS
\nThe following waived all dividends payable in the year, and all future dividends, on their
\nshareholdings in the Company:
\n\u2013
Winterflood Client Nominees Limited (Buck Trustees Dividend Waived Ltd)",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26784": {
"value": "0.402",
"decimals": 3,
"dimensions": {
"concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00",
"unit": "iso4217:GBP/xbrli:shares"
}
},
"f26785": {
"value": "0.273",
"decimals": 3,
"dimensions": {
"concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00",
"unit": "iso4217:GBP/xbrli:shares"
}
},
"f26788": {
"value": "0.383",
"decimals": 3,
"dimensions": {
"concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2021-08-01T00:00:00/2022-08-01T00:00:00",
"unit": "iso4217:GBP/xbrli:shares"
}
},
"f26789": {
"value": "0.26",
"decimals": 3,
"dimensions": {
"concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2021-08-01T00:00:00/2022-08-01T00:00:00",
"unit": "iso4217:GBP/xbrli:shares"
}
},
"f26802": {
"value": "26. RESERVES Retained earnings include the value of Smiths Group plc shares held by the Smiths Industries
\nEmployee Benefit Trust. In the year the Company issued nil (FY2022: nil) shares to the Trust, the
\nTrust purchased 1,553,558 shares (FY2022: 1,069,998 shares) in the market for a consideration
\nof \u00a325m (FY2022: \u00a316m) and redeemed 429,291 shares (FY2022: 777,700) to employees for a
\ncumulative option cost of \u00a31m (FY2022: \u00a3nil). At 31\u00a0July\u00a02023, the Trust held 1,742,929 (FY2022:
\n618,662) ordinary shares.
\nOther reserves comprise the capital redemption reserve, revaluation reserve and merger
\nreserve, which arose from share repurchases, revaluations of property, plant and equipment, and
\nmerger accounting for business combinations before the adoption of IFRS, respectively.
\nCAPITAL MANAGEMENT
\nCapital employed comprises total equity adjusted for goodwill recognised directly in reserves, net
\nretirement benefit-related assets\u00a0and liabilities, net litigation provisions relating to non-headline
\nitems and net debt. The efficiency of the allocation of capital to the divisions is monitored through
\nthe return on capital employed (ROCE). This ratio is calculated over a rolling 12-month period and
\nis the percentage that headline operating profit comprises of monthly average capital employed.
\nIn FY2023 ROCE was 15.7% (FY2022: 14.2%); see note\u00a029.
\nCapital structure is based on the Directors\u2019 judgement of the balance required to maintain
\nflexibility, whilst achieving an efficient cost of\u00a0capital.
\nThe FY2023 ratio of net debt to headline EBITDA of 0.7 (FY2022: 0.3) is within the Group\u2019s stated
\npolicy of 2.0 or less over the medium term. The Group\u2019s robust balance sheet and record of strong
\ncash generation are more than able to fund immediate investment needs and legacy obligations.
\nSee note 29 for the definition of headline EBITDA and the calculation of this ratio.
\nAs part of its capital management, the Group maintains a solid investment grade credit rating to
\nensure access to the widest\u00a0possible sources of financing and to optimise the resulting cost of
\ncapital. At 31 July 2023, the Group had a credit rating of BBB+/Baa2 (FY2022:\u00a0BBB+/Baa2) with
\nStandard & Poor\u2019s and Moody\u2019s respectively.
\nThe Board has a progressive dividend policy for future payouts, with the aim of increasing
\ndividends in line with the long-term underlying growth in earnings. In setting the level of dividend
\npayments, the Board will take into account prevailing economic conditions and future investment
\nplans, along with the objective to maintain a minimum dividend cover of at least two times.
\nHEDGE RESERVE
\nThe hedge reserve on the balance sheet records the cumulative gain or loss on designated
\nhedging instruments, and comprises:
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNet investment hedge reserve (net of \u00a38m of deferred tax (FY2022: \u00a38m))
(188)
(205)
\nCash-flow hedge reserve
\u2013
3
\n(188)
(202)
\nSee transactional currency exposure risk management disclosures in note 19 for additional
\ndetails of cash-flow hedges, and translational currency exposure risk management disclosure
\nalso in note 19 for additional details of net investment hedges.
\nNON-CONTROLLING INTEREST
\nThe Group has recorded non-controlling interests of \u00a322m (FY2022: \u00a322m), of which the most
\nsignificant balance is in John Crane Japan Inc., which represented \u00a319m (FY2022: \u00a320m) of the
\ntotal non-controlling interests.
\nThe non-controlling interest in John Crane Japan Inc. represents a 30% interest. John Crane
\nJapan Inc. generated operating profits of \u00a35m in the period (FY2022: \u00a35m), and cash inflows from
\noperating activities of \u00a32m (FY2022: \u00a35m). It paid dividends of \u00a31m (FY2022: \u00a31m) and tax of \u00a32m
\n(FY2022: \u00a31m). At 31 July 2023, the company contributed \u00a353m (FY2022: \u00a357m) of net assets to
\nthe Group.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26814": {
"value": "CAPITAL MANAGEMENT Capital employed comprises total equity adjusted for goodwill recognised directly in reserves, net
\nretirement benefit-related assets\u00a0and liabilities, net litigation provisions relating to non-headline
\nitems and net debt. The efficiency of the allocation of capital to the divisions is monitored through
\nthe return on capital employed (ROCE). This ratio is calculated over a rolling 12-month period and
\nis the percentage that headline operating profit comprises of monthly average capital employed.
\nIn FY2023 ROCE was 15.7% (FY2022: 14.2%); see note\u00a029.
\nCapital structure is based on the Directors\u2019 judgement of the balance required to maintain
\nflexibility, whilst achieving an efficient cost of\u00a0capital.
\nThe FY2023 ratio of net debt to headline EBITDA of 0.7 (FY2022: 0.3) is within the Group\u2019s stated
\npolicy of 2.0 or less over the medium term. The Group\u2019s robust balance sheet and record of strong
\ncash generation are more than able to fund immediate investment needs and legacy obligations.
\nSee note 29 for the definition of headline EBITDA and the calculation of this ratio.
\nAs part of its capital management, the Group maintains a solid investment grade credit rating to
\nensure access to the widest\u00a0possible sources of financing and to optimise the resulting cost of
\ncapital. At 31 July 2023, the Group had a credit rating of BBB+/Baa2 (FY2022:\u00a0BBB+/Baa2) with
\nStandard & Poor\u2019s and Moody\u2019s respectively.
\nThe Board has a progressive dividend policy for future payouts, with the aim of increasing
\ndividends in line with the long-term underlying growth in earnings. In setting the level of dividend
\npayments, the Board will take into account prevailing economic conditions and future investment
\nplans, along with the objective to maintain a minimum dividend cover of at least two times.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26856": {
"value": "NON-CONTROLLING INTEREST The Group has recorded non-controlling interests of \u00a322m (FY2022: \u00a322m), of which the most
\nsignificant balance is in John Crane Japan Inc., which represented \u00a319m (FY2022: \u00a320m) of the
\ntotal non-controlling interests.
\nThe non-controlling interest in John Crane Japan Inc. represents a 30% interest. John Crane
\nJapan Inc. generated operating profits of \u00a35m in the period (FY2022: \u00a35m), and cash inflows from
\noperating activities of \u00a32m (FY2022: \u00a35m). It paid dividends of \u00a31m (FY2022: \u00a31m) and tax of \u00a32m
\n(FY2022: \u00a31m). At 31 July 2023, the company contributed \u00a353m (FY2022: \u00a357m) of net assets to
the Group.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26894": {
"value": "27. ACQUISITIONS On 5 January 2023, the Group\u2019s Interconnect division acquired 100% of the share capital of
\nPlastronics Sockets & Connectors (Plastronics) for consideration of \u00a325m. The acquisition was
\nfinanced using the Group\u2019s own cash resources. Plastronics is a leading supplier of burn-in test
\nsockets and patented spring probe contacts for the semiconductor test market segment. This
\nacquisition strengthens the existing portfolio of Smiths Interconnect and provides cross-selling
\nopportunities in Asia and the US.
\nThe intangible assets recognised on acquisition comprise customer relationships, intellectual
\nproperty and technology. Goodwill represents the expected synergies from the strategic fit of the
\nacquisition and the value of the expertise in the assembled workforce. From the date of acquisition
\nto 31 July 2023, Plastronics contributed \u00a38m to revenue and less than \u00a31m to profit before taxation
\nand amortisation. If the Group had acquired this business from the beginning of the financial year,
\nthe acquisition would have contributed \u00a315m to revenue and less than \u00a31m to profit before taxation.
\nProvisional balances at the date of acquisition have been provided in the table below. The amounts
\nremain provisional due to the fair value of the deferred consideration not being finalised.
\nPlastronics
\n\u00a3m
\nNon-current assets
\u2013 acquired intangible assets
13
\n\u2013 plant and machinery
2
\nCurrent assets
\u2013 inventory
3
\n\u2013 trade and other receivables
3
\nCurrent liabilities
\u2013 trade and other payables
(3)
\nNet assets acquired
18
\nGoodwill on current period acquisitions
7
\nCash paid during the period
22
\nDeferred consideration
3
\nTotal consideration
25
\nPOST BALANCE SHEET DATE ACQUISITION
\nOn 30 August 2023, the Group acquired the business of Heating & Cooling Products (HCP), for
\nconsideration of approximately \u00a365m, financed using the Group\u2019s own cash resources. HCP is a
\nUS-based manufacturer of Heating, Ventilation & Air Conditioning (HVAC) solutions. This
\nacquisition will further expand the Flex-Tek division\u2019s presence in the North American HVAC
\nmarket, enabling Smiths to serve customers with an even broader product range.
\nThe acquisition has historically contributed \u00a347m of annualised revenue and \u00a36m of annualised
\nprofit before taxation. Due to the short time between the completion of the acquisition and the
\nannouncement date, it has not been possible to complete the determination of the fair values of
\nthe acquired balance sheet.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f26947": {
"value": "28. CASH-FLOW CASH-FLOW FROM OPERATING ACTIVITIES
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nOperating profit:
\n\u2013 continuing operations
501
(98)
403
417
(300)
117
\n\u2013 discontinued operations
\u2013
6
6
66
(47)
19
\nAmortisation of intangible assets
9
52
61
10
51
61
\nImpairment of intangible assets
\u2013
\u2013
\u2013
\u2013
4
4
\nImpairment of investment within
\ndiscontinued operations
\u2013
\u2013
\u2013
\u2013
14
14
\nDepreciation of property, plant
\nand equipment
42
\u2013
42
38
\u2013
38
\nDepreciation of right of use
\nassets
32
\u2013
32
30
\u2013
30
\n(Gain)/loss on disposal of
\nproperty, plant and equipment
\u2013
\u2013
\u2013
(2)
\u2013
(2)
\n(Gain)/loss on fair value of
\ncontingent consideration
\u2013
6
6
\u2013
\u2013
\u2013
\nShare-based payment expense
13
\u2013
13
13
\u2013
13
\nRetirement benefits*
5
(7)
(2)
5
207
212
\nDecrease/(increase) in
\ninventories
(88)
(1)
(89)
(173)
4
(169)
\nDecrease/(increase) in trade
\nand other receivables
(10)
(53)
(63)
(87)
4
(83)
\nIncrease/(decrease) in trade
\nand other payables
10
39
49
131
(2)
129
\nIncrease/(decrease) in
\nprovisions
(2)
(32)
(34)
(1)
22
21
\nCash generated from operations
512
(88)
424
447
(43)
404
\nInterest paid
(73)
(2)
(75)
(51)
\u2013
(51)
\nInterest received
36
\u2013
36
13
1
14
\nTax paid
(92)
\u2013
(92)
(88)
\u2013
(88)
\nNet cash inflow from operating
\nactivities
383
(90)
293
321
(42)
279
\n\u2013 continuing operations
383
(90)
293
274
(42)
232
\n\u2013 discontinued operations
\u2013
\u2013
\u2013
47
\u2013
47
\n*
The retirement benefits non-headline operating activities principally relate to employer contributions to legacy defined
\nbenefit and post-retirement healthcare plans.
\n
\n
\n
HEADLINE CASH MEASURES \u2013 CONTINUING OPERATIONS
\nThe Group measure of headline operating cash excludes interest and tax, and includes capital
\nexpenditure supporting organic growth. The Group uses operating cash-flow for the calculation
\nof\u00a0cash conversion and free cash-flow for management of capital purposes. See note 29 for
\nadditional details.
\nThe table below reconciles the Group\u2019s net cash-flow from operating activities to headline
\noperating cash-flow and free cash-flow:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nHeadline
\n\u00a3m
\nNon-headline
\n\u00a3m
\nTotal
\n\u00a3m
\nNet cash inflow from operating
\nactivities
383
(90)
293
274
(42)
232
\nInclude:
\nExpenditure on capitalised
\ndevelopment, other intangible
\nassets and property, plant and
\nequipment
(81)
\u2013
(81)
(71)
\u2013
(71)
\nRepayment of lease liabilities
(36)
\u2013
(36)
(34)
\u2013
(34)
\nDisposals of property, plant and
\nequipment
2
\u2013
2
3
\u2013
3
\nFree cash-flow
178
130
\nExclude:
\nRepayment of lease liabilities
36
\u2013
36
34
\u2013
34
\nInterest paid
73
\u2013
73
46
\u2013
46
\nInterest received
(36)
\u2013
(36)
(13)
\u2013
(13)
\nTax paid
92
\u2013
92
79
\u2013
79
\nOperating cash-flow
433
(90)
343
318
(42)
276
\nHEADLINE CASH CONVERSION
\nHeadline operating cash conversion for continuing operations is calculated as follows:
\nYear ended 31 July 2023
Year ended 31 July 2022
\nAs reported
\n\u00a3m
\nRestructuring
\ncosts
\n\u00a3m
\nPro-forma
\nexcluding
\nrestructuring
\ncosts
\n\u00a3m
\nAs reported
\n\u00a3m
\nRestructuring
\ncosts
\n\u00a3m
\nPro-forma
\nexcluding
\nrestructuring
\ncosts
\n\u00a3m
\nHeadline operating profit
501
\u2013
501
417
\u2013
417
\nHeadline operating cash-flow
433
\u2013
433
318
14
332
\nHeadline operating cash
\nconversion
86%
86%
76%
80%
\nRECONCILIATION OF FREE CASH-FLOW TO NET MOVEMENT IN CASH AND CASH
\nEQUIVALENTS:
\nYear ended
\n31 July 2023
\n\u00a3m
\nYear ended
\n31 July 2022
\n\u00a3m
\nFree cash-flow
178
130
\nInvestment in financial assets and acquisition of businesses
(22)
\u2013
\nDisposal of businesses and discontinued operations
(7)
1,331
\nOther net cash-flows used in financing activities (note: repayment of lease
\nliabilities is included in free cash-flow)
(909)
(937)
\nNet decrease in cash and cash equivalents for discontinued operations
\u2013
16
\nNet increase/(decrease) in cash and cash equivalents
(760)
540",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f27705": {
"value": "30. POST BALANCE SHEET EVENTS Details of the proposed final dividend announced since the end of the reporting period are given in
\nnote 25.
\nOn 30 August 2023, the Group completed the acquisition of HCP, see note 27 for details.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f27712": {
"value": "31. AUDIT EXEMPTION TAKEN FOR SUBSIDIARIES The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating
\nto the audit of individual accounts by virtue of Section 479A of that Act for FY2023.
\nCompany name
Company number
\nEIS Group Plc
61407
\nFlexibox International Limited
394688
\nFlex-Tek Group Limited
11545405
\nGraseby Limited
894638
\nSI Properties Limited
160881
\nSITI 1 Limited
4257042
\nSmiths Detection Group Limited
5138140
\nSmiths Detection Investments Limited
5146644
\nSmiths Finance Limited
7888063
\nSmiths Group Finance EU Limited
10440573
\nSmiths Group Finance US Limited
10440608
\nSmiths Group Innovation Limited
10953689
\nSmiths Interconnect Group Limited
6641403
\nSmiths Pensions Limited
2197444",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
},
"f28901": {
"value": "SMITHS GROUP PLC COMPANY ACCOUNTS COMPANY BALANCE SHEET
\nNotes
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nNON-CURRENT ASSETS
\nRight of use assets
2
\u2013
5
\nInvestments
3
2,431
2,422
\nLoans due from subsidiaries
3
2,447
561
\nRetirement benefit assets
10
195
309
\n5,073
3,297
\nCURRENT ASSETS
\nTrade and other receivables
5
67
62
\nCurrent tax receivable
\u2013
5
\nCash and cash equivalents
7
98
770
\nFinancial derivatives
9
6
9
\n171
846
\nTOTAL ASSETS
5,244
4,143
\nCURRENT LIABILITIES
\nTrade and other payables
6
(2,180)
(588)
\nLease liabilities
7
\u2013
(1)
\nFinancial derivatives
9
(6)
(29)
\n(2,186)
(618)
\nNON-CURRENT LIABILITIES
\nBorrowings
7
(557)
(545)
\nLease liabilities
7
\u2013
(5)
\nLoans due to subsidiaries
(5)
\u2013
\nProvisions for liabilities and charges
8
(1)
(2)
\nRetirement benefit liabilities
10
(40)
(47)
\nFinancial derivatives
9
(18)
(20)
\n(621)
(619)
\nTOTAL LIABILITIES
(2,807)
(1,237)
\nNET ASSETS
2,437
2,906
\nNotes
\n31 July 2023
\n\u00a3m
\n31 July 2022
\n\u00a3m
\nSHAREHOLDERS' EQUITY
\nCalled up share capital
11
131
136
\nShare premium account
11
365
365
\nCapital redemption reserve
11
24
19
\nOther reserves
11
181
181
\nProfit and loss account
11
1,736
2,205
\nTOTAL EQUITY
2,437
2,906
\nThe Company\u2019s loss for the period was \u00a322m (FY2022: \u00a31,257m profit).
\nThe accounts on pages 197 to 204 were approved by the Board of Directors on 25 September 2023
\nand were signed on its behalf by:
\nPAUL KEEL
CLARE SCHERRER
\nChief Executive Officer
Chief Financial Officer
\nSmiths Group plc \u2013 registered number 137013
\n
\n
\n
COMPANY STATEMENT OF CHANGES IN EQUITY
\nShare
\ncapital
\n\u00a3m
\nShare
\npremium
\n\u00a3m
\nCapital
\nredemption
\nreserve
\n\u00a3m
\nOther
\nreserves
\n\u00a3m
\nRetained
\nprofit
\n\u00a3m
\nShareholders\u2019
\nequity
\n\u00a3m
\nAt 31 July 2022
136
365
19
181
2,205
2,906
\nProfit for the year
\u2013
\u2013
\u2013
\u2013
(22)
(22)
\nOther comprehensive income:
\n\u2013 re-measurement of retirement benefits
\u2013
\u2013
\u2013
\u2013
(117)
(117)
\n\u2013 taxation recognised on retirement benefits
\u2013
\u2013
\u2013
\u2013
30
30
\nTotal comprehensive income for the year
\u2013
\u2013
\u2013
\u2013
(109)
(109)
\nTransactions with owners:
\nPurchase of shares by Employee Benefit Trust
\u2013
\u2013
\u2013
\u2013
(24)
(24)
\nShares purchased under a buyback programme
(5)
\u2013
5
\u2013
(207)
(207)
\nDividends paid to equity shareholders
\u2013
\u2013
\u2013
\u2013
(142)
(142)
\nShare-based payment
\u2013
\u2013
\u2013
\u2013
13
13
\nTotal transactions with owners recognised in equity
(5)
\u2013
5
\u2013
(360)
(360)
\nAt 31 July 2023
131
365
24
181
1,736
2,437
\nShare
\ncapital
\n\u00a3m
\nShare
\npremium
\n\u00a3m
\nCapital
\nredemption
\nreserve
\n\u00a3m
\nOther
\nreserves
\n\u00a3m
\nRetained
\nprofit
\n\u00a3m
\nShareholders\u2019
\nequity
\n\u00a3m
\nAt 31 July 2021
149
363
6
181
1,628
2,327
\nProfit for the year
\u2013
\u2013
\u2013
\u2013
1,257
1,257
\nOther comprehensive income:
\n\u2013 re-measurement of retirement benefits
\u2013
\u2013
\u2013
\u2013
(23)
(23)
\n\u2013 taxation recognised on retirement benefits
\u2013
\u2013
\u2013
\u2013
6
6
\nTotal comprehensive income for the year
\u2013
\u2013
\u2013
\u2013
1,240
1,240
\nTransactions with owners:
\nIssue of new equity shares
\u2013
2
\u2013
\u2013
\u2013
2
\nPurchase of shares by Employee Benefit Trust
\u2013
\u2013
\u2013
\u2013
(16)
(16)
\nProceeds received on exercise of employee share options
\u2013
\u2013
\u2013
\u2013
1
1
\nShares purchased under a buyback programme
(13)
\u2013
13
\u2013
(511)
(511)
\nDividends paid to equity shareholders
\u2013
\u2013
\u2013
\u2013
(150)
(150)
\nShare-based payment
\u2013
\u2013
\u2013
\u2013
13
13
\nTotal transactions with owners recognised in equity
(13)
2
13
\u2013
(663)
(661)
\nAt 31 July 2022
136
365
19
181
2,205
2,906",
"dimensions": {
"concept": "ifrs-full:DisclosureOfConsolidatedAndSeparateFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:213800MJL6IPZS3ASA11",
"period": "2022-08-01T00:00:00/2023-08-01T00:00:00"
}
}
}
}