The effects were first felt when the company put out last year’s results two weeks after the attacks and almost two months into the new financial year. At the time, Smiths feared a massive loss of income, particularly in its aerospace division.
But in March, despite lower interims, Smiths said results were not so grim. The aerospace division’s margins were down only 1%, and while profits had dropped 5% turnover was up from £596m to £639m.
Chief executive Keith Butler-Wheelhouse said that in the ‘exceptionally tough six months’ Smiths had shown resilience, focusing on disposals and restructuring in order to return to growth and the group was ‘more confident about the outlook for the second half of the year’.
After September 11, defence spending grew with increased demand for security products such as Smiths explosives detection systems. Since then, the company has been selling non-core businesses and has won several major contracts in its medical subsidiaries.
New accounting policies have also affected Smiths. The company adopted FRS19 referring to deferred taxation. Its interim results said: ‘As a result, an adjustment of £26m has been made to opening reserves to reflect the deferral of tax relating to goodwill acquired before 1 August 1998, and written off to reserves under accounting policies in force at that time. The effect on the reported profits of the prior period is not material.’
And the provisions of FRS10 on goodwill amortisation on acquisitions after August 1998 for 20 years also had an impact on interim accounts.
The charge for the period to January 31 2002 was £18.8m.
Mark McMullen joins the private client services team from Smith & Williamson
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