Investments
The company has continued to invest to create future value.

Gross research and development investment amounted to £604 million (1999 £626 million). In previous years, net research and development was stated after crediting certain receipts from risk and revenue sharing partnerships. All such receipts are now reported as other operating income. On the revised basis, net research and development was £371 million, an increase of £34 million, which was largely attributable to acquisitions.

Investment in training amounted to £27 million.

Capital expenditure, excluding investments in financial services businesses was £186 million, including £35 million invested by the newly acquired businesses.

Investment in financial services businesses amounted to £67 million. These sums represent investments in businesses which are expected to produce increasing returns.

The company invested £74 million in restructuring and rationalisation programmes. Ongoing restructuring, of £49 million was charged against cost of sales and included within the calculation of underlying earnings. Excluded from underlying earnings was £16 million spent on restructuring acquired businesses crystalising the benefits of acquisition synergies, and £9 million of rationalisation costs, which represents the first charges against the £150 million the company has indicated it will spend as part of a fundamental reassessment of the business structure. The company is identifying opportunities to accelerate this programme, bringing forward returns. It is likely that half of these rationalisation costs will be incurred by the end of 2001.

The company invests only in projects which create value and expects the cash flow return on investment to improve. This will result from growing margins, as the business mix improves and cost reductions are secured; improved working capital efficiency, through the implementation of new enterprise resource planning systems; and stable expenditure on fixed assets, as output levels stabilise following a period of rapid growth.