Amersham’s business fundamentals remain strong. In Amersham Health, we have continued to improve earnings quality, vigorously driving the growth of our patented products, including Visipaque™, our premium X-ray imaging product, where new clinical data further validated its excellent safety profile. Importantly our development portfolio in Medical Diagnostics is showing the benefits of sustained investment, with seven products now in phase III trials.

In Protein Separations, our bioprocess business is robust and long term prospects remain excellent as evidenced by the number of monoclonal antibodies in development and by the recent increase in FDA approvals of biopharmaceuticals. However, first half growth was affected by a slowdown in development in the new field of antisense drugs and difficult economic conditions in Europe held back sales in laboratory separations. In Discovery Systems, good progress is being made against our objective of achieving profitability during 2004. Restructuring is ahead of plan and cost savings of £16 million are expected this year.

The outlook for the second half is encouraging, with an expected continuation of steady growth in Amersham Health, a stronger performance in Protein Separations and further benefits coming though from the restructuring of Discovery Systems.

Business performance
Amersham plc sales were £808 million, up six per cent. Amersham Health sales were up eight per cent, Discovery Systems sales were up four per cent and Protein Separations sales were up three per cent. Global sales performance saw geographic variation with sales growth in North America, Amersham’s largest market, up 11 per cent, Europe flat and Japan up three per cent. Total R&D expenditure was up one per cent to £91 million, reflecting growth in line with sales in Amersham Health, increased R&D investment in Protein Separations and reduced expenditure in Discovery Systems as a result of the restructuring programme. Operating profit was £141 million, up five per cent. Profit before tax was £140 million, up eight per cent following a reduction in net interest expense from £4 million to £1 million.

In February 2003, the estimated adverse full year impact of exchange on profit before tax, based on the rates of exchange at that time, was £30 million. Since February, the position has worsened notably because of the US dollar and the Norwegian krone rates. As a result, in the first half of 2003, the adverse impact of foreign exchange on profit before tax was £29 million after hedging. Assuming the latest rates of exchange prevail for the remainder of 2003, the adverse impact on profit before tax for the year is now estimated to be around £40 million (4.1 pence per share at the earnings per share level) compared to 2002.

The tax charge has benefited from the reorganisation of the US tax group following the purchase of the minority stake in Amersham Biosciences in 2002. The tax rate was 31.5 per cent compared with 33.5 per cent in the first half of 2002. The lower tax rate, together with reduced minority interest expense, helped to offset the effect of the increase in the average number of shares in issue, leaving earnings per share at 13.7p up by seven per cent. The Board has approved an interim dividend of 2.85p per share, up eight per cent.

Following the announcement in February that Amersham was to restructure its Discovery Systems business, the company has recorded an exceptional charge in the first half of £41 million. Tax relief of £12 million is expected on this charge and the cash spend in the first half was £7 million. The total cost of the programme is expected to be £50 million before associated tax relief, of which £37 million is cash outlay. Tax relief is expected to be £15 million.

Net cash flow from operating activities before exceptional items was down from £134 million in 2002 to £106 million in the first half of 2003, affected by foreign exchange. Free cash flow before equity dividends was £10 million, compared with £60 million in the first half of 2002, reflecting higher capital expenditure mainly in new production capacity. Net debt at 30 June 2003 was £234 million, an increase of £52 million compared with 31 December 2002. This increase reflects the reduced free cash flow, cash expenditure on restructuring of £7 million, completion payments on earlier acquisitions totalling £12 million and adverse exchange rate movements.

Statutory results
The statutory results are shown after goodwill amortisation and exceptional items. Business performance profit before tax of £140 million was reduced by goodwill amortisation of £22 million and the exceptional restructuring charge of £41 million, giving statutory profit before tax of £77 million. This was down from £144 million in the comparable 2002 period because of an increase in goodwill amortisation, the exceptional restructuring charge and the adverse impact of exchange. Statutory earnings per share amounted to 6.4p, down from 14.9p in the first half of 2002.