During 2000 we took an important step forward in the strategic development of the group. In February last year we announced a review of our strategic options with regard to Amersham Pharmacia Biotech. In August we announced our intention to seek a partial flotation of 10 per cent of our shareholding in Amersham Pharmacia Biotech on NASDAQ, subject to market conditions. The announcement followed a renegotiation of the shareholder agreement with our fellow shareholder, Pharmacia Corporation. Under the new agreement , which comes into effect upon flotation, we have brought forward our option to purchase 15 to 20 per cent of Amersham Pharmacia Biotech from Pharmacia Corporation to June 2002.

During the second half of 2000 we have taken the necessary steps to realise our plans for flotation, including the recruitment of Sandra Cartie, Amersham Pharmacia Biotech CFO, and the relocation of the Amersham Pharmacia Biotech headquarters to the US in Piscataway, New Jersey. Sandra brings with her vital experience of operating in the US financial markets, as well as extensive commercial experience in the life sciences industry.

The announcement of our strategic review of our life sciences business and the decision to float has enabled our shareholders to more fully appreciate the value we have in our life science technologies and the potential for growth of this market. At the same time shareholders are seeing the strength of the performance in Nycomed Amersham Imaging, driven by patented product growth, which was 19 per cent in 2000, as a basis for sustainable and profitable future growth from this business.

Results overview
Sales for our continuing businesses were £1,377 million, up 10 per cent at constant exchange rates excluding sales of Nycomed Pharma which was discontinued in May 1999 and excluding the disposed businesses of Amersham Pharmacia Biotech and Nycomed Amersham Imaging.

Operating profit of our continuing business before exceptional items and goodwill amortisation was £241 million. This is two per cent below last year after an increase of 17 per cent in our investment in R&D expenditure of £23 million. This includes a £4 million early stage investment in the use of our own genomic platforms to potentially develop valuable diagnostic and prognostic markers. The key growth in research and development expenditure was in Amersham Pharmacia Biotech, which increased £20 million, or 35 per cent, following release of funds to invest in extending our drug discovery platforms. Some of these funds were redirected from savings in infrastructure costs in Nycomed Amersham Imaging following the closure of the TARC facility in the US in December 1999.

Strong cash flow and the reduction in net debt following the sale of Nycomed Pharma in 1999 have combined with favourable interest rate and currency mix movements to reduce net interest expense by £17 million to £10 million. Profit before tax was £231 million, level with 1999, before exceptional items and goodwill amortisation and before an adverse exchange impact of £3 million.

The company’s underlying tax rate, before exceptional items and goodwill amortisation, was lower by one per cent at 34 per cent. This is expected to be a sustainable reduction based on a lower statutory rate of taxation in Japan and a favourable shift in the geographical mix of profit. The tax rate, taking into account goodwill which is not deductible for tax, was 35.6 per cent before exceptional items.

Earnings per share were 22.5p before exceptional items and goodwill amortisation, compared with 21.1p last year including five months trading of the discontinued Nycomed Pharma business. On a comparable basis, for our continuing business, this represents a growth of eight per cent at constant exchange rates. We paid an interim dividend of 2.15p per share and the board is recommending a final dividend of 4.25p per share, bringing the total dividend to 6.40p for the year, an increase of nine per cent.

We have incurred exceptional operating costs in the year of £27 million compared with £50 million last year. Costs of £10 million have been recorded in the year associated with exiting the Nycomed Pharma business. This is in line with our plans at the time of the disposal. Overall we have reported a loss of £7 million after tax on the disposal. We continue to hold a 29 per cent stake in Nycomed Pharma, which is performing well as an independent company. Nycomed Amersham Imaging has recorded a charge of £11 million for the restructuring of its radiopharmaceutical manufacturing in Europe and the US. The restructuring is expected to yield benefits in terms of reduced annual costs of £3 million and better capital utilisation fro m 2002 onwards. We have also incurred costs of £6 million in preparation for the flotation of Amersham Pharmacia Biotech. We expect the proceeds from the flotation to give rise to a substantial gain, which will be recorded upon flotation.

Overall, basic earnings per share, after exceptional items and goodwill amortisation have increased from 14.5p in 1999 to 17.6p in 2000.

During 2000 we have implemented the relevant requirements of Financial Reporting Standard (FRS) 15 ‘Tangible Fixed Assets’ and FRS 16 ‘Current Tax’. The impact of these new standards has been in disclosure only. The Accounting Standards Board also issued in November 2000 FRS 17 ‘Retirement Benefits’ which will have a significant impact on the way that companies account for pensions and other post retirement benefits in the future. This new standard is applicable for accounting periods ending after June 2003, with a transitional period of disclosure prior to implementation. We are currently evaluating the impact of FRS 17 and will be making the relevant disclosures commencing 2001. In December 2000 the Accounting Standards Board issued FRS 18 ‘Accounting Polices’, which will be applicable for 2001. We are currently reviewing the application of FRS 18. Also in December 2000 the Accounting Standard Board issued FRS 19 ‘Deferred Tax’. Under FRS 19 we will move to a full provision basis for deferred tax from 2002.

Cash flows and investment activities

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