Smiths Group PLC

ANNUAL

REPORT &

ACCOUNTS

FY2026

For 175 years, Smiths has pushed the boundaries of engineering capability,

constantly evolving, innovating and helping customers perform when it

matters most.

From the company’s origins in precision timekeeping to the advanced

components supporting the historic Artemis II moon mission, Smiths products

have shaped the future of transport, energy, industrial processes and other

human endeavour.

Today, we are a focused, premium industrial engineering business specialising

in high-performance technologies in flow control, construction, thermal

solutions and aerospace. We continue to pioneer progress through innovation,

engineering excellence and the skills of our people.

Engineering a better future is our purpose. It unites our people, shapes the

way we think and act, and drives us to create lasting value and sustain growth

in the future.

How to navigate this report

Throughout this report you will find navigational tools for additional information in the report and

on our website.

Supporting data and insights

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Additional content in the report

Highlights and quotes from our team

OVERVIEW

Engineering a better future

IFC

FY2026 highlights

1

STRATEGIC REPORT

Chairman’s statement

2

Markets and megatrends

4

Our business model

5

CEO review

8

CFO review

12

Business review

15

Key performance indicators

19

Culture and sustainability

21

Managing our risks

33

Principal risks and uncertainties

35

Non-financial and sustainability information statement

45

Task Force on Climate-related Financial Disclosures

47

Going Concern and Viability Statement

53

GOVERNANCE

Chairman’s introduction

55

Board biographies

57

Board activity and key decisions

61

Section 172 Statement and stakeholder engagement

63

Nomination & Governance Committee report

66

Audit & Risk Committee report

69

Separation Oversight Committee report

76

Remuneration & People Committee report

77

Directors’ report

90

Statement of Directors’ responsibilities

92

FINANCIAL STATEMENTS

Independent auditor’s report

93

Consolidated primary statements

107

Accounting policies

112

Notes to the accounts

120

Unaudited Group financial record 2022–2026

167

Unaudited US dollar primary statements

168

Smiths Group plc Company accounts

173

Subsidiary undertakings

181

Shareholder information

185

ABOUT THIS REPORT

This is the Smiths Group plc

Annual Report & Accounts

FY2026.

Data presented in this report

is for continuing operations for

the 12 months to 31 July 2026

unless otherwise stated.

ACCESS MORE

INFORMATION

about Smiths

on our website

Scan to visit

our website

ENGINEERING

A BETTER FUTURE

Headline

3

Statutory

FY2026

FY2025

Reported

Organic

2

FY2026

FY2025

Reported

growth

Continuing operations: Smiths

1

Revenue

£1,937m

£1,898m

+2.1%

+1.2%

£1,937m

£1,898m

+2.1%

Operating profit

£399m

£388m

+2.7%

+1.9%

£289m

£347m

(16.6)%

Operating profit margin

4

20.6%

20.5%

+10bps

+20bps

–

EPS

86.8p

81.9p

+6.0%

–

49.5p

74.5p

(33.6)%

Operating cash conversion

4

96%

97%

(1)pps

–

Total Group

1

EPS

135.7p

121.2p

+12.0%

–

628.8p

85.7p

+634%

Dividend per share

48.5p

46.0p

+5.4%

–

48.5p

46.0p

+5.4%

Significant year of strategic progress

–

Organic revenue growth of +1.2%

–

John Crane: +2.3%; strong OE and Americas sales, whilst

absorbing a ~£20m Middle East conflict impact

–

Flex-Tek: (0.4)%; strong Aerospace offset by lower revenue

from Construction and Thermal Solutions

–

Headline operating profit margin expanded to 20.6%, alongside

investment in growth initiatives; ROCE of 23.5%

–

Acquired DRC Heat Transfer for £165m, extending Flex-Tek into

high-growth cooling and data centre markets

–

Divested Smiths Interconnect and Smiths Detection for a

combined EV of £3.3bn, ahead of market expectations; sales

agreed for three Flex-Tek industrial businesses for £40m as part

of portfolio high-grading

ROLAND CARTER

Chief Executive Officer

2026 was a year of significant strategic progress. We

transformed our portfolio and unlocked over £3bn of

value which repositioned Smiths as a focused,

premium industrial engineering company. We

delivered a resilient performance with growth in

revenue, profit and margin, and strong cash

generation in the face of ongoing macro uncertainty.

Over several years, we have purposefully aligned our

business to attractive end-markets and demand

trends that offer structural long-term growth.

Supported by a strong balance sheet and a high

proportion of aftermarket and recurring revenue, our

focus is to accelerate organic growth, enhance

innovation, execute with pace and discipline, and

compound value through disciplined capital allocation.

As we enter FY2027, underlying market conditions

remain challenging, but our robust order book and

business momentum underpins our expectation of

organic revenue growth of ~4% and further increasing

our operating margin into our medium-term target

range. The positive addition of DRC and data centre

exposure, the structural tailwinds in global energy

resulting from the anticipated response to energy

security and the positive portfolio development in

Flex-Tek supports our strong conviction that we will

more quickly deliver our 5-7% organic growth target

in the medium term. We are delivering significant

value today while creating a clear pathway to

substantial long-term value creation and sizeable

returns for shareholders.”

FY2026

HIGHLIGHTS

Statutory reporting takes account of all items excluded from headline performance. See accounting policies for an explanation of the presentation of results and

note 3 to the financial statements for an analysis of non-headline items. The following definitions are applied throughout the financial report:

1 Total Group refers to the combination of John Crane, Flex-Tek (including certain general industrial businesses), Smiths Detection and Smiths Interconnect. Smiths and/or

continuing operations refers to the combination of John Crane and Flex-Tek only (see note 28). All figures relate to ‘Smiths’ unless otherwise stated.

2 Organic is headline adjusted to exclude the effects of foreign exchange and acquisitions.

3 Headline: In addition to statutory reporting, the Group reports on a headline basis. Definitions of headline metrics, and information about the adjustments to statutory

measures, are provided in note 3 to the financial statements.

4 Alternative Performance Measures (APMs) and Key Performance Indicators (KPIs) are defined in note 30 to the financial statements.

–

Stronger balance sheet at £1,747m net cash, enhanced by

pension fund transactions; strong operating cash conversion

–

Announcing today the launch of a process to divest the John

Crane US legacy asbestos liability

–

Disciplined and efficient execution of share buyback programme;

£1.5bn buyback completed, £1.5bn still to be returned

–

FY2027 guidance ~4% organic revenue growth; headline

operating profit margin of ~21%

–

Strong conviction in achieving medium-term 5-7% organic

revenue growth and 21-23% operating profit margin targets

Statutory reporting and definitions

1

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

STEVE WILLIAMS

Chairman

Dear shareholders,

I am pleased to welcome you to

Smiths FY2026 Annual Report.

FY2026 was a defining year for

Smiths. As we marked 175 years

since the company was founded,

we also completed our strategic

transformation to a focused,

premium industrial engineering

company.

CHAIRMAN’S

STATEMENT

The Board is highly encouraged by the progress

made during the year. Smiths is now a higher-quality

business, with stronger financial flexibility and a clear

opportunity to deliver sustainable growth and attractive

returns for shareholders.

At the beginning of 2025, we announced our intention to

reshape the Smiths portfolio and unlock value through

the separation of Smiths Interconnect and Smiths

Detection. Both transactions were completed in FY2026

at attractive valuations of 15.1x and 12.5x FY2025

EBITDA respectively, generating £3.3bn of enterprise

value. These divestments have materially strengthened

the company’s financial position and given us greater

capacity to invest in growth while returning substantial

capital to shareholders.

Consistent with our previously stated intention, the

Board considered a range of mechanisms for returning

capital, including share buybacks, tender offers and

special dividends. We concluded that share buybacks,

alongside the retention of capacity for future

acquisitions, offered the right balance of flexibility,

discipline and value for shareholders. Following

completion of the FY2025 share buyback programme in

December, we launched a new £1bn programme

funded from the proceeds of Smiths Interconnect. This

programme has been completed and will be followed

by a further £1.5bn programme from the proceeds of

Smiths Detection. We have also increased the dividend

again this year.

Our approach to capital allocation remains unchanged:

disciplined investment in organic growth and value-

accretive acquisitions, balanced with appropriate

returns to shareholders. We will continue to keep the

portfolio under review, including the recent exit of

selected non-core Flex-Tek industrial businesses, and

to address legacy liabilities where doing so enhances

free cashflow and long-term value.

Business performance and outlook

Our continuing businesses, John Crane and Flex-Tek,

delivered a resilient performance in FY2026. Organic

revenue grew 1.2% despite geopolitical uncertainty

affecting energy markets and continued weakness

in US construction. Headline operating profit increased

1.9% organically, resulting in a margin of 20.6%,

approaching our medium-term target range of 21-23%.

These businesses serve attractive markets in flow

control, thermal solutions, construction and aerospace,

each supported by fundamental long-term demand

drivers and expected annual growth of 4-5% over the

medium term. Smiths is well positioned to benefit

from these trends and to outperform through our

relaunched strategic priorities: accelerating growth

initiatives; innovating for differentiation and growth;

executing with focus through customer orientation and

Smiths Excellence; and compounding value through

disciplined M&A such as the recent acquisition of

DRC Heat Transfer.

Looking ahead, the Board is confident that Smiths can

make further progress against each of its medium-

term targets in FY2027, build resilience through the

cycle and deliver the premium industrial financial

profile to which we are committed.

The divestments of Smiths Interconnect

and Smiths Detection have materially

strengthened the company’s financial

position and capacity to invest in growth.

Markets and megatrends

Read more about our

markets and the trends

driving them

Page

4

2

Smiths Group plc Annual Report FY2026

CHAIRMAN’S STATEMENT

CONTINUED

People and culture

The strength of Smiths is rooted in its people and

culture. Culture is an important driver of performance,

and the Board was pleased to take part in a

comprehensive review to identify the cultural

characteristics that will help us build lasting

competitive advantage. We were also encouraged by

the improvement across every measure in this year’s

employee engagement survey. Talent and skills will be

central to our future success, and we are using data

more effectively to anticipate future needs and align

skills development, recruitment and early careers

programmes with our product, technology, process,

materials and manufacturing roadmaps.

We also wish to make a positive contribution beyond the

business. To mark our 175th anniversary, the Board

approved an £18.51m (reflecting our founding year)

expansion of the invested fund available to the Smiths

Foundation. The Foundation’s first scholarship fund

was awarded in July to Aston University in Birmingham

to provide 45 scholarships in mechanical engineering,

manufacturing, AI and other STEM-related degree

subjects. The scholarships will support students who

are the first in their families to attend university and

those from lower-income households. Aston’s

proximity to our new Birmingham office, together with

its strong representation of students from lower-

income and disadvantaged communities, makes it a

natural partner for the Foundation’s objectives and for

our ambition to build stronger links with future talent.

Similar partnerships are being discussed with further

education providers in the US and Mexico, and the

Foundation will continue to support colleague-

nominated charities and environmental protection,

restoration and biodiversity projects.

Changes to the Board

The composition of the Board has also evolved during

the year. Following the retirement of Mark Seligman,

Noel Tata and Karin Hoeing at the 2025 AGM, we

initiated a search for a new Non-executive Director,

resulting in the appointment of Laurence Mulliez,

who joined the Board on 1 September 2026. After the

Board’s strategy review in May 2026, and mindful of

the future needs of the company, we undertook a

further search and recommended the appointments of

Val Rahmani and Emma FitzGerald, who will join the

Board in October and November, respectively. Each

brings complementary skills and experience which will

strengthen the breadth of perspective around the Board

table as we execute our strategy. Laurence brings

extensive strategic and sustainability experience; Val

brings deep expertise in technology, cyber security,

digital and AI; and Emma adds significant customer-led

innovation experience across the energy, industrials and

infrastructure sectors.

On behalf of the Board, I warmly welcome Laurence,

Val and Emma, and thank Mark, Noel and Karin for

their significant contributions during their tenures.

I also thank my fellow Directors for their counsel and

commitment during a year of considerable change.

Together, we have overseen the successful delivery

of major strategic milestones that position Smiths

strongly for the future.

Finally, I would like to thank all Smiths colleagues for

their resilience, professionalism and commitment

throughout the year, including those colleagues who

have moved with Smiths Interconnect and Smiths

Detection. Their contribution has been central to what

we have achieved and to the strong position from which

Smiths now moves forward.

Steve Williams

Chairman

1. Strong market positions supported by structural

growth trends with clear competitive advantages

and growth prospects

2. Driving innovation to meet evolving customer

needs and support growth

3. A customer-centric operating model with a high

proportion of aftermarket and recurring revenue

4. A disciplined approach to capital allocation and

growth investment, targeting attractive organic

growth opportunities and value-accretive M&A

5. A high-performing culture with capabilities that

deliver competitive advantage

Investment case

A focused, premium industrial engineering company

6. A premium industrial financial profile –

sustainable growth, high returns, strong cash

generation and balance sheet strength

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

3

Our businesses serve attractive end markets supported by powerful structural megatrends and robust market drivers in each business area.

MARKETS AND MEGATRENDS

Market drivers

Products

Market drivers

Business growth opportunities

Flow control

Mechanical seals

Systems and controls

Filtration systems

High-performance couplings

–

Energy security

–

Process resilience

–

Energy transition

–

Industrial capex

–

Performance efficiency

–

Environmental concerns

–

Energy with next generation products and digital

–

Leadership position in energy transition

–

Target select industrial markets and geographies

–

Aftermarket excellence

Construction

Flexible ducting for heating, ventilation and air

conditioning (HVAC)

Metal HVAC ducting and components

Corrugated stainless steel tubing (CSST) for gas

Refrigerant line-sets

–

US housing demand

–

Growth in commercial

–

Performance efficiency

–

Environmental concerns

–

HVAC adjacencies and integrated systems

–

Geographic expansion

–

New products

–

Transition out of low growth industrial

Thermal solutions

Electric industrial heating

Heat transfer and cooling systems

–

Industrial process electrification

–

Process efficiency and cost

–

Data centre growth

–

Data centre cooling

–

Integrated/customised industrial heating solutions

–

Ultra-high temperature electrical heat >1200°C

–

Aftermarket offer

Aerospace

Rigid tube assemblies

High precision manifolds

Flexible hoses

Custom hose systems

–

Air travel demand

–

Commercial aircraft backlog

–

Growth in space and defence platforms

–

Grow key platforms

–

Target new aircraft/engine positions

–

Expand geographical reach

–

Expand maintenance, repair, overhaul (MRO)/

aftermarket

–

Custom solutions for space and defence

Business revenue split

Structural megatrends

Productivity and sustainability

–

advancing technology-enabled systems, resource efficiency and decarbonisation

Geopolitical volatility

–

reshaping markets, supply chains and regulatory environments

Energy demand

and energy security

–

accelerating investment in

secure, reliable, efficient and

diversified energy systems

Industrial electrification

–

transforming industrial

processes, transport and

building design

Housing availability

and affordability

–

driving demand for new and

more efficient homes

Aviation growth

–

resulting in fleet expansion,

demand for parts and

technical services and new

platforms in commercial,

space and defence

John Crane

58%

Flex-Tek

42%

Flow control

58%

Construction

19%

Thermal solutions

11%

Aerospace

12%

Note: Flow control is

split into Energy (37%) and

Industrial (21%)

Americas

63%

Europe

15%

APAC

13%

ROW

9%

4

Smiths Group plc Annual Report FY2026

Building on strong foundations, our business model activates the critical levers that strengthen resilience

and increase our agility to capture opportunities to drive lasting value and sustainable growth.

OUR BUSINESS MODEL

1. Customer-centric businesses

Our two businesses operate close to the customer, delivering growth through customer focus and innovation.

They are operationally empowered and own commercial strategy, operational execution and talent.

John Crane

A global leader in mission-critical

technologies and services that drive

efficiency, safety and sustainability

in energy and large-scale

industrial processes.

Flow control

Builds and maintains an extensive

installed base of customised

mechanical seal solutions that

drive a quality, service-based,

cash generative aftermarket that

often lasts for >20 years.

–

Market leading positions

–

Differentiated proprietary

technologies and expertise

across industries

–

Deep customer intimacy

–

Predictable aftermarket –

global network of field service

capability and expertise

Read more on

Page

15

Flex-Tek

Innovative engineered components

for safe, efficient, heating,

cooling and movement of

liquids and gases.

Construction

Leading customer service and deep

relationships with wholesale

distributors that strengthen

geographical coverage across

North America and scale growth

from new products.

–

Top 3 US market position with

scale in a fragmented market

–

Capacity and opportunity to

leverage further

–

Trusted relationships with

customers and distributors

Thermal solutions

Solutions-led, with a wide range of

low to high temperature

customised heating applications

for industrial electrification,

enabling customers to upgrade

their processes for efficiency,

safety and sustainability.

–

Broad low to high temperature

product range

–

Limited competitor expertise/

footprint

–

Data centre exposure

Aerospace

Customer service, product

innovation and manufacturing

capability strengthen positions on

commercial and defence platforms

alongside margin and relationship

enhancing aftermarket services.

–

Trusted partner reputation

–

Platform incumbency with

high barriers to entry and long

pipeline tail

–

Agility in custom engineered

solutions

Read more on

Page

16

2. Lean corporate centre

Our corporate centre

steers business growth

and creates value through

targeted investment in

opportunities and the

enablers of success.

1. Drives strategy and

operating performance

of businesses

Read more on

Page

9

2. Allocates capital, M&A

and integration

Read more on

Page

10

3. Incentivises delivery

Read more on

Page

77

4. Shapes culture

Read more on

Page

22

5. Promotes Smiths

Excellence and

cross-collaboration

for competitive advantage

Read more on

Page

6

6. Ensures governance

and compliance

Read more on

Page

28

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

5

3. How are we driving competitive advantage?

A high-performing culture

Our culture is a powerful driver of performance,

inspiring Smiths colleagues every day to

contribute, innovate and excel.

It creates the environment that enables us to deliver sustainable

competitive advantage through the collective strength of

our people.

In FY2026, we undertook a comprehensive review of our culture

to assess its strengths and identify the opportunities that will

help us realise our future ambitions. This work is shaping an

investment strategy and roadmap focused on strengthening the

cultural drivers that matter most including trust, empowerment,

accountability, a shared sense of purpose and innovation. We

report key culture and engagement measures through the

Smiths scorecard.

Underpinning this culture are our Values, which were refreshed

during the year to ensure they continue to reflect who we are,

how we work together, and the behaviours that will drive our

success in the years ahead.

Operational excellence

Smiths Excellence is our common approach to

continuous improvement, providing a shared

language and disciplined framework for

improving performance across Smiths.

Built on Lean and Six Sigma principles, it empowers teams to

challenge the status quo, eliminate waste, address root causes

and unlock greater value.

Embedded across our operations and functions, Smiths

Excellence combines proven tools, performance scorecards

and capability development to identify, accelerate and deliver

high-impact improvements. These initiatives help us increase

speed to market, enhance productivity, improve quality and

advance our sustainability ambitions.

The strength of Smiths Excellence lies in our people. Many

colleagues hold Green or Black Belt accreditations, and the

Excellence mindset is embedded through training and

development opportunities and Yellow Belt projects available to

all colleagues. By equipping our teams at the grass roots with

the problem-solving skills and confidence to drive change, we

are maturing our Lean journey and creating a culture where

continuous improvement is everyday work.

In FY2026, Smiths Excellence continued to deliver measurable

impact across the business, helping us to operate

systematically to improve margins, strengthen customer

outcomes and accelerate performance.

We are accountable,

capable & empowered

Ownership

Customer

Focus

We deliver, innovate and

grow with our customers

We ensure safety

is our foundation

Safety

We win the right way

Integrity

Engineering a better future

Respect

We build trust by

respecting others

OUR BUSINESS MODEL

CONTINUED

6

Smiths Group plc Annual Report FY2026

3. How are we driving competitive advantage?

continued

A different approach to innovation

Innovation is a key driver of differentiation,

enabling customisation and the extension of

solution lifecycles while strengthening pricing

power and margin resilience.

Our approach combines sustained investment in product

development with disciplined commercialisation, ensuring that

new ideas are translated into tangible growth opportunities.

To enhance our innovation capability, we have developed

five-year roadmaps across products, technology, process,

materials and manufacturing, with a renewed emphasis on

digital, AI and supply chain excellence. These are supported by

skills roadmaps to identify capability gaps and unlock

opportunities for collaboration across our businesses,

alongside early career programmes designed to build the talent

and expertise needed for the future.

We are also strengthening our innovation ecosystem. A senior

technical community meets monthly to share expertise and

catalyse progress and our partnership with the UK

Manufacturing Technology Centre is being scaled further. At the

same time, we are introducing a standard product lifecycle

process, incorporating eco-design, to accelerate new product

development (NPD) and commercialisation, supported by a

planned programme centre of excellence to enhance delivery

discipline across Smiths.

Finally, we are launching a new innovation framework fully

connected with Smiths Excellence. The framework will embed a

methodical, customer-led, problem-driven approach to

innovation, creating a repeatable engine that ensures efforts

are focused on value-enhancing NPD.

Talent and capabilities

Our success depends on building the critical

capabilities that will power future growth.

By identifying and strengthening the skills most important to

our strategy – including innovation, M&A and integration,

programme management, Excellence and Lean, enterprise IT

and people leadership – we are creating a strong, future-ready

talent pipeline across the business.

A key focus is ensuring our leaders have the capability to drive

innovation, accelerate growth in our core markets and deliver

outstanding performance. Alongside this, we are building talent

resilience through targeted capability development and robust

succession pipelines, ensuring we have the right talent in place

today and for the future.

We are also aligning skills development with our product,

technology, process materials and manufacturing roadmaps,

enabling our people to develop the expertise needed to support

evolving priorities. Early careers programmes in key locations

are helping us attract and develop the next generation of talent,

while performance-based reward arrangements recognise and

incentivise high achievement and growth.

Underpinning these efforts is continued investment in data,

digital tools and systems that enhance efficiency, provide

deeper workforce insights and enable both better leadership

and data-driven decision-making.

M&A

Recycling the strong cashflow generated by the

business to fund M&A opportunities continues to

upgrade the quality of the portfolio and enhance

the strategic positioning of Smiths.

We have an active pipeline of potential acquisitions, prioritising

bolt-on acquisitions that accelerate growth, margins and

capabilities in adjacent markets as well as selective early-stage

investments to provide faster access to emerging technologies

and new markets.

Financial discipline remains paramount, with a commitment to

delivering an appropriate return and maintaining leverage at a

level that sustains an efficient balance sheet and an investment

grade credit rating. Equally important is rigorous execution on

integration, ensuring acquired businesses deliver their intended

value and contribute seamlessly to growth and margin.

OUR BUSINESS MODEL

CONTINUED

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

7

BUSINESS UPDATE

Smiths – a focused, premium industrial engineering

company

FY2026 was a transformational year for Smiths as we

celebrated the company’s 175th year anniversary.

We

completed the divestments of Smiths Interconnect and

Smiths Detection, crystallising significant shareholder

value and repositioning Smiths as a focused, premium

industrial engineering company. The transactions were

completed at attractive valuations of 15.1x and 12.5x

FY2025 EBITDA, respectively, generating £3.3bn of

enterprise value, substantially strengthening our

financial flexibility and delivering market-leading,

enhanced returns to shareholders.

The actions we have taken create a focused Smiths,

with a higher-quality portfolio, clear strategic priorities,

a strong financial profile of sustainable attractive

growth, and structurally higher margin and cashflow

returns. Smiths is a high-quality business with leading

market positions, where significant aftermarket and

recurring revenues provide resilience through

economic cycles, to deliver sustainable returns.

Financial performance

For FY2026, we delivered a resilient financial

performance against the backdrop of significant

end-market disruption in global energy and US

residential construction markets.

–

Organic revenue grew +1.2%:

–

John Crane grew +2.3% with a strong

performance in the Americas, in original

equipment sales and in dry gas seals. Growth

was negatively impacted by ~£20m due to the

conflict in the Middle East; growth excluding this

impact was ~4%;

–

Flex-Tek declined (0.4)% with strong aerospace

growth more than offset by declines in the HVAC

US residential construction market and lower

revenue in Thermal Solutions;

–

Headline operating profit grew +1.9% organically

to £399m, ahead of expectations, with headline

operating profit margin expanding to 20.6% and a

return on invested capital of 23.5%;

–

Strong cash generation with operating cash

conversion of 96%;

–

Strong headline EPS growth of +12.0% on a reported

basis, where growth in underlying earnings was

further enhanced by the share buyback programme

and acquisitions.

Strong market positions aligned to structural growth

trends

The repositioned portfolio is exposed to several

powerful global trends in structurally attractive

markets across flow control, construction, thermal

solutions and aerospace. These are supported by

long-term fundamental demand drivers that underpin

overall market growth expectations of 4-5% over the

medium term.

–

Energy demand and security (~5% CAGR) – the

heightened focus on energy security, resilience and

supply diversification and greater investment in critical

energy infrastructure strengthens the medium-term

growth outlook, creating a positive backdrop for John

Crane. While the Middle East conflict is creating near-

term volatility, John Crane’s strong regional presence

and critical role in customer recovery efforts ideally

position the business to support them. In energy

transition, the development of hydrogen, carbon

capture, geothermal and other technologies provide

attractive growth areas where John Crane is well

positioned.

–

Housing availability and affordability (~5% CAGR) –

population growth and the shortage of US housing

continues to support long-term demand in the

US residential construction market. Affordability

pressures and higher interest rates are weighing on

near-term demand, so whilst the timing and pace

of recovery remains uncertain, the longer-term

opportunities remain positive. Flex-Tek’s innovative

products, wide geographic presence and strong

distributor relationships position the business well

for recovery and future growth.

–

Industrial electrification (~6% CAGR) – is a powerful

long-term growth driver, underpinned by the

electrification of industrial processes, industrial

decarbonisation, automation and energy efficiency.

Manufacturers are accelerating the transition from

CEO

REVIEW

ROLAND CARTER

Chief Executive Officer

Smiths is a high-quality business

with clear strategic priorities, a

strong financial profile of sustainable

growth, and structurally higher

margin and cashflow return.

Markets and megatrends

Read more about our

markets and the trends

driving them

Page

4

8

Smiths Group plc Annual Report FY2026

CEO REVIEW

CONTINUED

fossil fuel-based systems towards electric thermal

solutions. Rapid investment in data centres and

digital infrastructure is driving significant demand

for power generation and thermal management

solutions. The recent acquisitions of Wattco and

DRC Heat Transfer in Flex-Tek’s Thermal Solutions

pillar notably expanded our exposure to these highly

attractive growth opportunities.

–

Aviation growth (~4% CAGR) – commercial and

military aerospace demand remains strong,

supported by growing passenger traffic, record

multi-year aircraft backlogs and increasing defence

expenditure. With high barriers to entry due to

strict certifications and long platform cycles,

qualified suppliers like Flex-Tek, with its advanced

manufacturing and testing capabilities and long-

term supply arrangements, are well placed to

support this demand.

Underpinning these trends is the ongoing focus on

productivity and sustainability. Demand for our products

is driven by customers’ desire to improve resource

efficiency, drive production and reduce emissions. Whilst

geopolitical uncertainty and volatility is increasingly the

new normality, our business model provides resilience to

challenging conditions and the flexibility to take

advantage of new opportunities as they emerge.

Smiths Growth Algorithm

Our leading market positions set us up to drive

outperformance and deliver our medium-term,

through-cycle, organic revenue growth target of 5-7%.

Our Growth Algorithm strategy is centred on four

strategic growth priorities – accelerate our growth

initiatives, innovate with impact, execute relentlessly

and compound value through disciplined capital

allocation. These initiatives, alongside the positive

addition of DRC and data centre exposure, the

structural tailwinds in global energy resulting from the

anticipated response to energy security and the positive

portfolio development in Flex-Tek, supports our strong

conviction that we will more quickly deliver our 5-7%

organic growth target in the medium term.

Accelerate

We are accelerating the pace of delivery of our strategic

growth initiatives and increasing investment behind the

highest return opportunities. By strengthening our

product offering, strategic pricing, expanding into

higher-growth adjacencies and investing in commercial

excellence, we expect to drive above market growth.

During FY2026, this included targeted expansion into

higher growth geographies and customer

opportunities.

–

In John Crane, our strong market position in the

US and Latin America ensured we captured the

higher growth in these markets, with further

plans to expand our presence here; leveraging our

portfolio and leadership position in gas projects to

benefit from record investment saw wins in LNG

and NGL projects; and our focus on aftermarket

growth enabled us to capture important contract

wins in energy and chemicals supported by our

Performance Plus framework (see John Crane

business review for further detail);

–

In Flex-Tek, targeted customer initiatives in US

residential construction drove a strong fourth

quarter performance; Thermal Solutions advanced

a number of notable electrification opportunities

and new platform projects; and in Aerospace, long-

term contract renewals delivered higher price and

growth in overall shipset on key engine platforms

(see Flex-Tek business review for further detail).

Innovate

Innovation is a key source of differentiation, and we

continue to invest to increase the quantum and pace of

impact to deliver growth and competitive advantage.

Our approach combines sustained investment in

product development with disciplined commercialisation,

ensuring that new product concepts are translated into

tangible growth.

We develop and apply five-year innovation roadmaps for

each business, spanning technology, products,

materials and manufacturing processes, that support

both the evolution of existing product for new

performance requirements and applications, and the

development of new, differentiated offerings.

The growth algorithm

Our strategy to deliver sustainable growth, high returns and strong cash generation

through the cycle:

1. Accelerate

Accelerate

organic growth through

maximising the core and targeted

investment into new opportunities

4. Compound

Invest free cashflow into value-

accretive acquisitions that will

compound

growth and value

2. Innovate

Innovate

to meet customer needs,

drive customer intimacy and deliver

growth

3. Execute

Execute

relentlessly, applying

Smiths Excellence and investing

in people, processes and systems

Medium-term targets

See our medium-term

targets

Page

11

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

9

CEO REVIEW

CONTINUED

Values reinforce our commitment to safety and

wellbeing, and investment in talent development,

career pathways and succession planning is focused on

building the leadership and engineering capabilities to

support long-term growth.

Compound

M&A is the final component of our Growth Algorithm,

compounding organic growth. This approach has been

demonstrated in Flex-Tek which over the past eight

years has delivered double-digit compound annual

revenue growth. Acquisition returns have notably

exceeded cost of capital and are delivering significant

value creation under Smiths ownership. This has

broadened the geographic coverage in Construction

and shifted the mix of Flex-Tek revenue, with a larger

contribution in particular from Thermal Solutions, now

around a third of annualised revenue.

We have clear criteria for the strategic and financial

characteristics of the targets and have a pipeline of

opportunities across multiple vectors. The acquisition

of DRC Heat Transfer in April 2026 demonstrates this

approach in action. The business expands Flex-Tek’s

thermal management capabilities, adds exposure to

the fast-growth data centre market, and creates

opportunities for commercial and operational synergies

across Smiths. With pro-forma growth in FY2026 of

more than 20% and the market expected to grow

20-25% through 2030, we are actively investing in

people, capabilities, capacity and processes to scale for

customer demand and support this new high-growth

opportunity.

Examples during FY2026 include:

–

John Crane’s Type 93AX separation seal with

reduced nitrogen consumption for safer and more

sustainable operations; and the ongoing installation

of nine new test rigs to provide capability for the

testing at higher pressure and speeds for more

demanding applications such as hydrogen;

–

Flex-Tek drove operational improvement in

the production of the HVAC Blue series by the

introduction of a heat-tunnel system that enhances

quality of the foam and reduces machine cycle

times; Wattco is working with a US company on

a customised energy storage solution; and in

Aerospace, we continue to work with customers

in the development of new high-pressure hoses,

boosted by new equipment capability in our

production facilities.

Execute

Operational excellence is foundational to growth and

value creation. Following the portfolio simplification,

Smiths operates through focused business units

supported by a lean corporate centre focused on capital

allocation, driving and incentivising performance, and

promoting a culture of performance, excellence, safety

and ethics.

Smiths Excellence is increasingly embedded across the

business, with a focus on lean tools, manufacturing

processes, automation and supply chain resilience to

underpin consistent execution and operational delivery.

During the year, execution of the Acceleration Plan

delivered benefits through site consolidation and

footprint optimisation, process standardisation, ERP

harmonisation and automation. We incurred costs of

£27m, taking the total spend to £43m, and to date have

delivered £20m of annual plan benefits, remaining on

track to achieve the FY2027 annualised target of

£30-35m.

Through this period of transformation, we are

strengthening the culture to build a more agile,

empowered and accountable organisation focused on

delivering for our customers. Our refreshed Smiths

75th

Successive year of dividend

payments

Business review

Read more about how our

businesses are supporting

the growth algorithm

Page

15

Our capital allocation framework –

deploying cashflow to deliver growth and returns

Organic

investment

Value-accretive

acquisitions

Portfolio

management

Progressive

dividend policy

Enhanced

shareholder

returns

RD&E

1

3-4%

of revenue

Capex 2-3% of

revenue

Commercial and

strategic growth

initiatives

Higher-growth

market

adjacencies

Expand into

attractive growth

opportunities

Driving growth

and returns

Divest non-core

assets

Address legacy

liabilities

Strengthen

balance sheet

Enhance FCF

conversion

Average growth of

+5.2% in past 5

years

75 consecutive

years of dividend

payments

Return surplus

capital

Ongoing share

buyback

programme

potential

Supported by strong balance sheet and solid investment grade credit rating

1 Including John Crane’s customer-specific engineering-related projects.

10

Smiths Group plc Annual Report FY2026

CEO REVIEW

CONTINUED

Disciplined capital allocation

Our capital allocation strategy prioritises growth

investment, both organically and inorganically, to

deliver enhanced returns to shareholders.

–

Organic growth – RD&E (research, development

and engineering, 3-4% of revenue) and capital

expenditure (2-3%) supports continued investment

into organic growth opportunities. We continue to

identify opportunities to expand investment, whilst

delivering operating margin in the medium-term

target 21-23% range.

–

Value-accretive acquisitions – our strategy is to

recycle generated free cashflow into acquisitions

in high-growth adjacencies to compound organic

growth. We will invest inorganically in businesses

that align with, or are adjacent to, our existing

portfolio, in attractive long-term market sub-

segments supported by structural trends.

–

Portfolio management – we continue to evaluate the

shape of the portfolio and exit non-core activities.

This year, we elected to divest four Flex-Tek

industrial businesses, with sales agreed for three of

them for a combined value of £40m, with two of the

sales completed in FY2026.

–

Progressive dividends – in alignment with

our progressive dividend policy, the Board is

recommending a dividend increase of +5.4%, the

75th year of successive dividend payments.

–

Enhanced shareholder returns – the portfolio

reshaping has enabled enhanced returns to

shareholders, with £2.6bn returned in the past

five years. Following the completion of the FY2025

£500m share buyback programme in December, a

further £1bn related to the proceeds from the sale

of Smiths Interconnect has now been returned. A

further £1.5bn is still to be executed in relation to

the Smiths Detection proceeds and is expected to

be substantially completed by end of calendar year

2027. The General Meeting held in July to increase

our authority to repurchase shares demonstrates

our desire to action this at pace.

–

Balance sheet strength – we look at means to

strengthen our balance sheet and improve the

quality of our free cashflow. During the year, we

completed the buy-in of the Smiths Industries

Pension Scheme and buy-out of the TI Group

Pension Scheme. We are also announcing today that

our US John Crane business will begin a marketing

process for the divestiture of its legacy asbestos

liabilities. If successful, this transaction would

remove the asbestos liability from the balance

sheet, increase free cashflow and available capital

and reduce earnings volatility.

These actions reflect our disciplined approach to

capital allocation. We aim to operate an efficient

balance sheet whilst retaining a solid investment grade

credit rating. The issuance of a €650m bond during the

year, to refinance the equivalent size bond maturing in

February 2027, has provided liquidity to meet our future

needs.

FY2027 outlook and medium-term guidance

We expect FY2027 organic revenue growth of around

4%, supported by a robust order book.

–

John Crane is expected to see growth weighted

to the second half of the year, and our outlook

assumes continued disruption in the first half in the

Middle East with growth in other regions, supported

by our order book.

–

Flex-Tek is expected to see growth weighted to the

first half of the year. Our outlook assumes the US

construction market will remain subdued, although

we will continue to implement customer initiatives

and price increases to drive performance. Thermal

Solutions is expected to benefit from underlying

business growth and the year-on-year comparator,

supplemented by the DRC acquisition. In Aerospace,

the strength of our order book and coverage

supports a similarly positive outlook for the year.

The FY2027 headline operating margin is expected to

be around 21%. We expect to enter our medium-term

target range of 21-23% through operating leverage,

achieving the remaining benefits of the Acceleration

Plan and continued Smiths Excellence efficiency

savings, alongside additional investment into strategic

growth initiatives.

We expect headline operating cash conversion of

low 90%s.

Technical guidance

FY2027

FX headwind

– Revenue

~(1)%

–

Operating profit

~(1)%

Net finance expense

£10-15m

Effective tax rate

24-25%

Capital expenditure

~£65m

Pension contributions

~£10m

Medium-term targets

We remain committed to achieving our medium-term,

through cycle, targets. Together with continued

underlying performance, the positive addition of DRC

and data centre exposure, the structural tailwinds in

global energy resulting from the anticipated response

to energy security driving growth in John Crane and the

positive portfolio development in Flex-Tek supports our

strong conviction that we will more quickly deliver our

5-7% organic revenue growth target in the medium

term.

Medium-term targets (through-cycle)

Target

Organic revenue growth

5-7% (+ M&A)

Headline EPS growth

>10% (+ M&A)

Headline operating profit margin

21-23%

ROCE

>20%

Headline operating cash conversion

~100%

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

11

JULIAN FAGGE

Chief Financial Officer

For FY2026, we delivered a resilient

financial performance against

challenging backdrops in energy and

US construction.

Organic revenue grew +1.2% and

operating profit margin expanded

to 20.6%, alongside increased

investment in growth initiatives.

Return on invested capital was 23.5%

and cash generation was strong, with

operating cash conversion of 96%.

We maintain a disciplined approach

to capital allocation to drive growth,

financial returns and free cashflow,

while retaining a strong balance

sheet and a solid investment-grade

credit rating.

Revenue

Smiths revenue increased +1.2% on an organic basis and +2.1% on a reported basis to £1,937m (FY2025: £1,898m).

This included £(32)m of negative foreign exchange translation and a +£49m contribution from the acquisitions of

Modular Metal Fabricators, Inc (‘Modular Metal’), Wattco, Inc (‘Wattco’), Duc-Pac Corporation (‘Duc-Pac’) in

FY2025 and DRC Heat Transfer (‘DRC’), which completed in April 2026.

£m

FY2025

Foreign

exchange

Acquisitions

Organic

movement

FY2026

Revenue (continuing operations)

1,898

(32)

49

22

1,937

Organic revenue grew +2.3% in John Crane and together with a further +2.6% contribution from acquisitions.

This was partly offset by a (0.4)% organic revenue decline in Flex-Tek and a (1.7)% impact from foreign

exchange translation.

–

John Crane growth reflected a resilient performance in energy against the backdrop of the Middle East

conflict which had a ~£20m impact on revenue in the second half. Excluding this region, revenue growth was

~4%, reflecting mid-single digit growth in the Americas and good overall OE sales growth.

–

Flex-Tek benefited from a strong performance in Aerospace reflecting volume growth from new build

programmes and new contract renegotiations. This was offset by the impact of the weak US residential

construction market on HVAC and Thermal Solutions and the completion of a large ultra-high heat contract.

Momentum improved in the second half, with Flex-Tek delivering MSD growth in the fourth quarter.

CFO

REVIEW

Revenue (£m)

FY2026

FY2025

Reported

Organic

John Crane

1,130

1,115

+1.4%

+2.3%

Flex-Tek

807

783

+3.1%

(0.4)%

Smiths

1,937

1,898

+2.1%

+1.2%

Headline operating profit (£m)

John Crane

270

265

+1.9%

+3.5%

Flex-Tek

170

169

+0.0%

(4.2)%

Central costs

(41)

(46)

(11.2)%

(10.7)%

Smiths

399

388

+2.7%

+1.9%

Headline operating profit margin (%)

John Crane

23.9%

23.8%

+10bps

+30bps

Flex-Tek

21.0%

21.6%

(60)bps

(80)bps

Smiths

20.6%

20.5%

+10bps

+20bps

Business reviews

Read more about John

Crane and Flex-Tek

Page

15

Smiths Group plc Annual Report FY2026

12

Smiths Group plc Annual Report FY2026

CFO REVIEW

CONTINUED

Operating profit

Headline operating profit was £399m (FY2025: £388m); +1.9% (+£7m) on an organic basis, and +2.7%

(+£11m) on a reported basis. Acquisitions contributed £12m to operating profit and were accretive

to margin.

£m

FY2025

Foreign

exchange

Acquisitions

Organic

movement

FY2026

Headline operating profit (continuing

operations)

388

(8)

12

7

399

Headline operating profit margin (continuing

operations)

20.5%

(20)bps

10bps

20bps

20.6%

Headline operating profit margin was 20.6%, up +20bps on an organic basis and +10bps on a

reported basis, demonstrating steady progress towards the medium-term target range of 21-23%.

Margin improvement in John Crane and a reduction in central costs was partly offset by a margin

decline in Flex-Tek.

–

John Crane operating margin expanded +30bps organically, driven by increased pricing and

positive mix, Smiths Excellence and Acceleration Plan benefits, alongside an increase in

strategic growth investments;

–

Flex-Tek’s margin declined (80)bps organically, reflecting lower volume and mix impacts

following the completion of a higher-margin heating project and the net impact from US tariffs.

ROCE decreased to 23.5% (FY2025: 24.5%), with the higher profitability more than offset by an

increase in the capital base due to acquisitions and an FX impact.

Earnings per share

Total Group headline EPS grew +12.0% to 135.7p (FY2025: 121.2p). This included a £9m increase in

headline finance costs to £36m due to the timing of the share buyback programmes during the year

and a headline tax charge of £89m (FY2025: £82m), with a 24.4% effective tax rate.

Smiths Detection, Smiths Interconnect and certain general industrial businesses within Flex-Tek

are classified as discontinued operations. The headline profit after tax contribution to earnings from

the discontinued operations was £153m (FY2025: £133m). This reflected an eight-month

contribution from Smiths Interconnect and 11 months from Smiths Detection.

Smiths continuing operations headline EPS for the year was 86.8p. (FY2025: 81.9p).

Cashflow

Headline operating cash conversion was 96% (FY2025: 97%), supported by the year-on-year

improvement in profit and lower capex, with machining and test rig investment projects in John

Crane now largely complete. Headline operating cashflow was £384m (FY2025: £377m) with the

increase in operating profit and lower capex offset by working capital movements, reflecting an

increase in inventory levels to underpin delivery of the order book and service customers as well as

an increase in receivables, partly related to the impact from the conflict in the Middle East. Free

cashflow generation decreased to £256m (FY2025: £336m) or 45% of reported underlying Group

headline operating profit (FY2025: 58%), as a result of the divestments, and also reflecting costs of

the Acceleration Plan and additional US pension contributions.

Capital allocation

Organic investment

Investment in RD&E of £64m (FY2025: £63m) represented 3.3% (FY2025: 3.3%) of revenue. This

included £41m (FY2025: £40m) on customer-specific engineering-related projects in John Crane.

Capex decreased to £39m (FY2025: £51m) and included investment in capacity and automation and

initiatives under the Acceleration Plan.

Value-creative M&A

In April, we acquired DRC for £165m. DRC is being integrated into Flex-Tek’s newly formed Thermal

Solutions business and is consistent with the strategy of building into high growth adjacencies. DRC

generated £35.5m in revenue in the four months of ownership.

Enhanced shareholder returns – share buyback and dividend

In December 2025, the £500m share buyback programme completed. A new £1bn programme was

commenced to return a large portion of the proceeds from the sale of Smiths Interconnect, which

has now completed. A further £1.5bn share buyback programme from the proceeds of the sale of

Smiths Detection has now commenced. The Board is recommending a final dividend of 33.5p, a

year-on-year increase of +5.4% bringing the total dividend for the year to 48.5p (FY2025: 46.0p). The

proposed final dividend will be paid on 23 November 2026 to shareholders on the register at close of

business on 16 October 2026.

Net debt and leverage

Smiths net cash at 31 July 2026 increased to £1,747m (FY2025: net debt of £462m), with the year-on-

year movement reflecting the net proceeds from the divestments of Smiths Interconnect and

Smiths Detection, partly offset by the share buyback programme and DRC acquisition.

As at 31 July 2026, borrowings were £1,204m (FY2025: £667m) comprising a €650m bond which

matures in February 2027, a €650m bond which matures in 2033 and £104m of lease liabilities.

There are no financial covenants associated with these borrowings. Cash and cash equivalents as at

31 July 2026 were £2,956m (FY2025: £195m).

Together with an $800m (£594m at the year-end exchange rate) revolving credit facility, which

matures in May 2030, total liquidity was £3.6bn at the year end.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

13

Foreign exchange

The results of overseas operations are translated into sterling at average exchange rates. Net

assets are translated at period-end rates. The principal exchange rates, expressed in terms of the

value of Sterling, are as follows:

Average rates

Period-end rates

31 Jul 2026

(12 months)

31 Jul 2025

(12 months)

31 Jul 2026

31 Jul 2025

USD

1.34

1.30

1.35

1.32

EUR

1.15

1.19

1.17

1.16

CFO REVIEW

CONTINUED

Statutory results

Income statement and cashflow

The £110m difference (FY2025: £41m) between continuing operations headline operating profit of

£399m and statutory profit of £289m are non-headline items. The largest of these relate to a legacy

pension scheme settlement loss of £57m, the amortisation of acquired intangible assets of £33m,

Acceleration Plan corporate restructuring costs of £27m, a £30m net credit for asbestos litigation

provision in John Crane Inc, and £8m separation related expenses.

Discontinued operations include Smiths Interconnect, Smiths Detection and four Flex-Tek general

industrial businesses. Statutory operating profit from discontinued operations was £1,660m higher

than headline operating profit due to non-headline items. The largest of these relate to the £1,690m

gain realised on the disposal of discontinued operations, partially offset by £11m of impairment

losses recognised on the Flex-Tek general industrial businesses and £8m of Smiths Detection

restructuring and separation related costs.

Total finance costs for continuing operations have increased by £14m to £44m (FY2025: £30m). This

increase has been driven by an increase in debt during the year from the share buyback

programme, offset in the second half of the financial year by the net proceeds from the divestments.

The statutory effective tax rate (‘ETR’) for the Group (including discontinued operations) was 6.7%

(FY2025: 28.8%) and includes a non-headline tax credit of £4m (FY2025: £19m credit). The FY2026

statutory ETR was significantly influenced by material non-headline items including the non-taxable

gains arising on the disposal of Smiths Detection and Smiths Interconnect, which both qualify for the

Substantial Shareholding Exemption; non-deductible costs associated with these disposals and

other M&A activity; and the settlement of the buy-in of the SIPS pension scheme.

Statutory profit after tax for the Group was £1,972m (FY2025: £292m) and statutory basic EPS was

628.8p (FY2025: 85.7p).

Statutory net cash inflow from operating activities for the Group was £241m (FY2025: £456m).

Pensions

During the year, £15m of pension contributions (FY2025: £11m) were made, which relate to funded,

unfunded and overseas schemes and healthcare arrangements. Of this, £10m related to the US

defined benefit pension plan.

In May 2026, the TIGPS trustee converted the existing buy-in policies to buy-out policies. The

liabilities and corresponding assets of TIGPS have therefore been de-recognised from 11 May 2026,

as the legal obligation for payment of benefits transferred to the relevant insurers from that date. In

July 2026, the SIPS trustee completed a deal to secure its remaining uninsured pension liabilities by

way of a bulk annuity buy-in with M&G. As a result, as at 31 July 2026, 100% of the remaining funded

UK liabilities had been de-risked through the purchase of annuities from third-party insurers.

Litigation

Litigation provisions remain a significant area of judgement for the company. During the year,

provisions relating to John Crane asbestos litigation and Titeflex product liability claims were

revised to £153m (FY2025: £191m) and £29m (FY2025: £26m), respectively. Further details of the

provisions, related judgements and estimates are provided in note 23 to the financial statements.

14

Smiths Group plc Annual Report FY2026

BUSINESS REVIEW

John Crane

FY2026

FY2025

Reported

Organic growth

£m

growth

H1

H2

FY

Revenue

1,130

1,115

+1.4%

+2.0%

+2.6%

+2.3%

Original Equipment (‘OE’)

180

174

+3.2%

+1.8%

+6.4%

+4.1%

Aftermarket

532

528

+0.7%

+4.6%

(0.6)%

+1.9%

Energy

712

702

+1.3%

+3.9%

+1.1%

+2.5%

Original Equipment

154

148

+4.4%

(0.9)%

+10.4%

+4.8%

Aftermarket

264

265

(0.1)%

(1.2)%

+2.0%

+0.4%

Industrial

418

413

+1.5%

(1.1)%

+5.0%

+2.0%

Headline operating profit

270

265

+1.9%

+4.2%

+3.0%

+3.5%

Headline operating profit margin

23.9%

23.8%

+10bps

+50bps

+10bps

+30bps

Statutory operating profit

274

264

+4.0%

Return on capital employed

24.5%

25.2%

(70)bps

RD&E cash costs as % of sales

1

5.1%

–

1 Includes cash R&D expenditure (1.5% of sales) and spend on customer-specific engineering-related projects (3.6%)

Market backdrop

The conflict in the Middle East and its wider ramifications is having a material impact on the global

energy market, and volatility remains high. The timing for the resolution of the conflict is uncertain

but implications on energy security and reliability are expected to have a positive medium-term

effect on demand, and likely require additional investment in oil and gas production, energy mix,

transport and storage both in and outside the Middle East. Total energy demand is expected to grow

~5% CAGR over the medium term.

Within industrial markets, we see notable opportunities in chemicals, mining and pulp and paper. In

chemicals, excess capacity in China is limiting growth though we see targeted opportunities in the

US and Asia-Pacific. In mining, there is high demand for energy transition materials and in pulp and

paper, packaging and tissue growth support demand. Industrial demand is expected to grow ~3-4%

CAGR over the medium term.

Performance

£m

FY2025

reported

Foreign

exchange

Organic

movement

FY2026

reported

Revenue

1,115

(10)

25

1,130

Headline operating profit

265

(4)

9

270

Headline operating profit margin

23.8%

23.9%

Revenue

Despite a challenging market back-drop, John Crane delivered organic revenue growth of +2.3% for

the year, a resilient performance and supported by an improvement in operational execution, with

faster lead times and improved on-time delivery. Reported revenue was +1.4% higher year-on-year

at £1,130m, with the organic growth partly offset by a negative (0.9)% foreign exchange impact.

Energy

–

Organic revenue grew +2.5% with growth in both original equipment (‘OE’) and aftermarket

(‘AM’). The conflict in the Middle East impacted sales by ~£20m as OE programmes were

delayed and maintenance programmes were impacted by the disruption and closure of facilities

in the region. Sales were strong in the US and in Latin America, reflecting robust customer

demand as rates of production accelerated.

–

In OE, growth of +4.1% reflected strong demand for dry gas seals, partly offset by lower

systems sales which reflected project phasing delays and a strong year-on-year comparator.

–

Aftermarket organic revenue increased +1.9% reflecting continuing expansion in the installed

base and growth in customer aftermarket service contracts but was particularly impacted by

slowdowns in the Middle East.

Industrial

–

In industrial markets, organic revenue increased +2.0% reflecting good growth in OE, with

aftermarket revenue up marginally year-on-year. Growth in general industrial, particularly in

the mining and water sectors, was offset by lower revenue in chemicals in China and Japan.

Operating profit

Headline operating profit of £270m grew +3.5% on an organic basis, resulting in a margin of 23.9%,

a +30bps improvement on an organic basis, and +10bps higher on a reported basis.

This organic improvement was driven by increased pricing and positive mix effects, Acceleration

Plan and Smiths Excellence benefits, partly offset by cost inflation and an £8m increase in

investment in strategic OE projects.

On a reported basis, headline operating profit was up +1.9%, with the organic improvement partly

offset by a (1.6)% negative foreign exchange impact. Statutory operating profit includes the net credit

in relation to the provision for John Crane, Inc. asbestos litigation, partially offset by the costs

incurred in relation to the Acceleration Plan.

ROCE was 24.5%, with the profit growth partly offset by a higher capital base, resulting from the

investments in machining and test rig projects, and the FX impact.

FY2027 outlook

Growth for John Crane in FY2027 is expected to be weighted to the second half. The Middle East

conflict continues to add uncertainty to the near-term outlook for John Crane, and whilst the

business has proved to be resilient, it continues to see disruption in the short term. In the medium

term, we expect OE orders to increase as projects restart and the recovery phase begins. John

Crane is well-placed to support the region as the aftermarket also recovers given our strong local

presence and notable importance to our customer base for recovery and execution. Outside the

Middle East, we continue to see growth opportunities particularly in the US and Latin America as

higher energy prices drive demand, particularly for AM services as demand accelerates.

Accelerate

During the year, John Crane made good progress against its strategy to deliver above-market

growth through driving the core portfolio and its leadership gas position, growing aftermarket

services, alongside executing initiatives in energy transition and attractive industrial markets. The

investments in machining and test rigs will also assist here through improved customer service and

reduced delivery times.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

15

BUSINESS REVIEW

CONTINUED

FY2026

FY2025

1

Reported

Organic growth

£m

growth

H1

H2

FY

Revenue

807

783

+3.1%

(2.0)%

+0.9%

(0.4)%

Construction

359

371

(3.3)%

(5.8)%

(1.6)%

(3.6)%

Thermal Solutions

221

202

+9.4%

(7.8)%

(4.7)%

(6.2)%

Aerospace

227

210

+8.2%

+10.1%

+11.0%

+10.6%

Headline operating profit

170

169

+0.0%

(4.6)%

(3.9)%

(4.2)%

Headline operating profit margin

21.0%

21.6%

(60)bps

(110)bps

(80)bps

Statutory operating profit

124

142

(12.6)%

Return on capital employed

26.3%

28.5%

(220)bps

RD&E cash costs as % of sales

0.7 %

0.7%

–

1 The comparatives for FY2025 have been re-presented to reflect the reclassification of certain Flex-Tek general

industrial businesses as discontinued operations. These businesses had a FY2026 contribution of £46m to revenue and

a £(3)m operating loss (FY2025: £54m revenue and £5m loss)

Market backdrop

The US residential construction market remained challenging with housing starts and building

permits down (0.8%) and (2.1)%, respectively, in FY2026. Thermal markets grew strongly behind the

growth in US data centre investment as well as ongoing strong demand for industrial process

electrification. The aerospace and defence market remained strong, with demand supported by new

commercial aircraft build programmes and increased defence spending.

Over the medium term, the US residential market is expected to grow ~5% CAGR, driven by US

housing demand and a shortage of housing. US data centre capacity demand is expected to grow

20-25% annually through 2030, primarily driven by AI and cloud demand. Looking ahead, the

industrial electrification market is expected to grow ~6% CAGR, underpinned by industrial process

electrification, process efficiency and data centre cooling. The aerospace fluid conveyance systems

market is expected to grow ~4% CAGR over the medium term.

Performance

£m

FY2025

1

reported

Foreign

exchange

Acquisitions

Organic

movement

FY2026

reported

Revenue

783

(22)

49

(3)

807

Headline operating profit

169

(4)

12

(7)

170

Headline operating profit margin

21.6%

21.0%

Revenue

Organic revenue declined marginally by (0.4)% in FY2026, impacted by market-driven weakness in

construction and revenue decline in thermal projects, mostly offset by strong growth in aerospace.

Reported revenue increased +3.1%, with a positive contribution from acquisitions of +6.4% (+£49m),

partly offset by a negative foreign exchange translation effect.

In its core gas business, John Crane secured major contracts supporting both LNG and NGL

projects, further strengthening its position in global gas infrastructure, a market underpinned by

ongoing energy security investment. With installations in approximately 90% of the world’s largest

LNG facilities, John Crane is well positioned to benefit from the significant long-term aftermarket

opportunities these assets generate.

Several important contract wins and customer partnerships for reliability management contracts in

energy and chemicals reinforced the business’s expanding aftermarket position, and within higher

growth energy transition markets, opportunities in geothermal power and carbon capture and

storage were an area of focus.

In industrial markets, John Crane secured agreements and expanded its presence in structurally

attractive industrial segments, including projects in pulp and paper and for critical minerals

infrastructure, supporting long-term industrial and energy transition demand.

All these contracts illustrate our business model and strategy in action – develop strong, intimate

customer relationships to deliver superior products and services that provide attractive recurring

aftermarket revenue visibility that reinforce embedded long-term customer relationships.

Innovate

RD&E investment was 5.1% of sales and advanced our product capabilities and underpinned our

drive to capture a greater share of aftermarket. Customer response to the Type 93AX Coaxial

Separation Seal has been very positive. We launched the Type 8628VL, a next generation

mechanical seal engineered to address the challenge of maintaining seal integrity in multi-phase

ethane and ethylene pipelines. To extend our product capability, John Crane developed an industry-

first validated methodology that significantly improves the accuracy of drivetrain analysis in critical

rotating equipment improving predictive accuracy which can have a direct impact on customers’

operational performance, project delivery and costs.

We re-launched Performance Plus™ modular service framework to support the drive to expand our

aftermarket position. The tailored service solutions adapt to each customer’s operational

experience, bringing together smart technology, data insights and expertise to keep operations

running smoothly, reliably, safely and sustainably.

Supporting our drive into attractive industrial markets, John Crane’s Type SB2 USP technology won

the Most Innovative Water Solution category at the Manufacturing Supplier Innovation Awards UK

2026. The technology helps customers significantly reduce water consumption in demanding

industrial applications while maintaining sealing performance and equipment reliability.

Flex-Tek

16

Smiths Group plc Annual Report FY2026

BUSINESS REVIEW

CONTINUED

Construction (45% of revenue)

–

Organic revenue declined (3.6)% in the year, reflecting slow demand for HVAC products. There

was a sequential improvement in performance through the year and growth returned in Q4,

at +2.9%, as a result of targeted customer wins, particularly in flexible ducting and multi-

family projects. The performance was against a strong prior year comparator which benefited

from post-acquisition revenue synergies from flexible ducting products, as well as market

consolidation amongst major customers. The integration of Modular Metal and Duc-Pac are

now complete, strengthening our geographical coverage, positioning us well for when the

market turns positive.

Thermal Solutions (27% of revenue)

–

Organic revenue declined (6.2)%, following the impact from customer destocking of heat kits

in the first half and the completion of the ultra-high heating project in October 2025. Revenue

was enhanced by the Wattco acquisition which is fully integrated and now benefits from

capacity expansion to satisfy the demand of products and solutions to capitalise on the ongoing

industrial electrification trend. In addition, the acquisition of DRC Heat Transfer completed

in April 2026, expanding our offering to cooling solutions and positions Flex-Tek to serve

customers in fast-growing power generation and data centre markets, and is growing strongly

on a pro-forma basis.

Aerospace (28% of revenue)

–

Organic revenue grew +10.6%, reflecting continued successful execution against its strong

order book across both commercial (~70% of revenue) and defence (~30% of revenue) aircraft

programmes, and the price and volume benefits from long-term contract renewals across

key customers. We delivered strong double-digit growth in both India and in our MRO business

(~10% of revenue), two strategic growth priorities for the business. This performance also

reflected recent investments in machining automation which have enabled capacity flexibility,

as well as efficiency gains.

Operating profit

Headline operating profit declined (4.2)% on an organic basis. Organic operating margin declined

(80)bps to 21.0% largely as a result of lower volumes in construction, investment in growth initiatives

and a limited impact from tariffs, partly offset by pricing and operational efficiency savings. On a

reported basis, operating profit was flat, benefiting from the DRC profit contribution, whilst

operating margin declined (60)bps.

Statutory operating profit includes the amortisation of acquired intangible assets, an increase to the

Titeflex Corporation subrogation claims provision driven by an increase in the number of expected

claims, and costs incurred in relation to the Acceleration Plan.

ROCE declined (220)bps to 26.3%, reflecting the headline operating profit decline and the impact of

acquisitions on the capital base.

FY2027 outlook

Flex-Tek is expected to return to growth in FY2027, weighted to the first half.

–

Construction remains focused on driving performance, with the timing of the US construction

market recovery remaining uncertain. The business expects to benefit from continued

customer wins and new pricing initiatives.

–

Thermal Solutions performance is expected to benefit from underlying business growth

supplemented by the DRC acquisition, as well as the phasing out of destocking effect in heat

kits, and the ultra-high heating contract from the second quarter.

–

Aerospace finished the year with a strong order book, with coverage of ~65% for FY2027

offering good visibility and is expected to benefit from continued positive performance in

targeted growth areas as well as recent contract renewals.

Accelerate

–

In Construction, growth initiatives focused on the core portfolio include leveraging strong

distributor relationships to continue expanding market share and in FY2026, this included

investing into the higher-growth Canadian market which presents an opportunity to increase

market penetration and broaden customer reach.

–

In Thermal Solutions, we are increasingly moving from a product approach towards

customised solutions that create greater value for customers and strengthen our competitive

position. The first priority is accelerating our position in data centre cooling, with DRC

presenting a large immediate growth opportunity, and plans underway to ramp up capacity to

meet the strong demand being driven by data centre back-up power needs. Our second priority

is building a leadership position in high-value electrification. The pipeline of projects remains

positive, including the provision of electric heaters for ultra-low emission electro-fuel and data

centre safety-power projects.

–

In Aerospace, the second half included contract renewals with major aircraft engine

manufacturers. These contracts deepen the long-standing relationships and support some

of the most important engine manufacturing programmes in global aviation. They include a

five-year contract with GE Aerospace across its key commercial and defence-related engine

fleets. The business continues to drive expansion of its shipset content, its MRO capabilities,

which include supporting the repair of Pratt & Whitney’s geared turbofan engine, and investing

in higher-growth geographies such as India.

Innovate

Innovation within HVAC solutions continues to progress across multiple product categories. The

Blue Series polyurethane-insulated sheet metal HVAC components are gaining traction with new

customers, particularly in the southern US, with further growth expected in FY2027. Enhancements

to the Python line set portfolio are also underway, improving compatibility with mini-split systems

to simplify installation, enhance the installer experience, and reduce overall installed costs.

Thermal Solutions remains focused on combining heating technologies with controls, panels and

integrated systems, making it easier for customers to solve increasingly complex challenges.

Aerospace continues to work with customers in the development of new high-pressure hoses. New

equipment capability in our facilities have enabled meeting high pressure hose demands, as well as

making improvements in our internal laboratory to speed up development times.

Portfolio management

During the year, we agreed the sale of three general industrial businesses for a combined value of

£40m (with one still to complete, expected in the first quarter). The process for the remaining one is

ongoing. Further information can be found in note 28.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

17

BUSINESS REVIEW

CONTINUED

FY2026

1

FY2025

Reported

Organic growth

£m

growth

H1

H2

FY

Revenue

921

963

(4.4)%

+11.7%

+6.1%

+9.0%

Reported headline underlying

operating profit

126

122

+3.3%

+34.4%

+11.7%

+22.9%

Headline operating profit margin

13.7%

12.7%

+100bps

+230bps

+70bps

+150bps

Return on capital employed

13.1%

11.4%

+170bps

Smiths Detection (Disposal completed on 30 June 2026)

Smiths Interconnect (Disposal completed on 31 March 2026)

FY2026

1

FY2025

Reported

Organic growth

£m

growth

H1

H2

FY

Revenue

253

421

(39.9)%

+6.3%

+12.1%

+7.8%

Reported headline underlying

operating profit

50

75

(33.3)%

(1.0)%

+20.1%

+4.4%

Headline operating profit margin

19.7%

17.8%

+190bps

(140)bps

+140bps

(70)bps

Return on capital employed

17.8%

16.7%

+110bps

1 FY2026 absolutes represent the contribution for the time they were owned. Reported growth reflects the change in

absolutes, whilst organic growth reflects growth over 8 months of ownership in each year. These figures include Smiths

Interconnect’s US sub-systems business unit, which was sold in Q1 FY2026.

Smiths Interconnect’s organic revenue increased +7.8%, led by continued momentum in the

semi-test business with demand from key customers across multiple AI and data centre

programmes. Reported revenue declined (39.9)%, largely reflecting only an eight-month

contribution following the sale of the business on 31 March 2026, together with negative foreign

exchange.

Headline operating profit increased +4.4% on an organic basis. Headline operating profit margin

increased to 19.7%, (70)bps lower on an organic basis and +190bps higher on a reported basis. The

benefit from the sale of its US sub-systems business unit as well as efficiency improvements and

Smiths Excellence benefits, were partly offset by negative mix effects and higher materials costs.

ROCE improved +110bps to 17.8%, driven by the increase in headline operating profit.

1 FY2026 absolutes represent the contribution for the time they were owned. Reported growth reflects the change in

absolutes, whilst organic growth reflects growth over 11 months of ownership in each year.

Smiths Detection delivered strong organic revenue growth at +9.0%, successfully converting its

strong order book into revenue, driven by growth in Aviation and Other Detection Systems, in both

OE and aftermarket. Reported revenue declined (4.4)% reflecting the 11-month contribution with the

sale completing on 30 June 2026, and a negative foreign exchange effect.

Headline operating profit increased +22.9% on an organic basis, reflecting the strong volume

growth and favourable mix from higher aftermarket growth in Aviation, as well as efficiency and

Acceleration Plan benefits, and despite the impact of US tariffs. Headline operating profit margin

increased to +13.7%, +150bps on an organic basis. On a reported basis, headline operating profit

increased +3.3%.

ROCE increased +170bps to 13.1%, reflecting the growth in headline operating profit.

Smiths Group plc Annual Report FY2026

18

Smiths Group plc Annual Report FY2026

Financial KPIs

FY2026 progress

Performance

Organic revenue growth

Sustainable acceleration of above market growth will deliver

best-in-class value creation.

Medium-term target

5-7%

We delivered a resilient organic revenue growth of

+1.2% against the backdrop of significant end-market

disruption in global energy and US residential

construction markets.

FY2024

FY2025

FY2026

1.2%

3.8%

5.9%

CEO review

Page

8

Linked to remuneration

Headline operating profit margin

Stronger execution will drive higher margins and enable further

investment for growth.

Medium-term target

21-23%

We delivered headline operating growth of +1.9%

organically, ahead of expectations, with margin

expanding to 20.6%, driven by positive pricing,

benefits from the Acceleration Plan and good cost

management, alongside continued investment for

growth.

FY2024

FY2025

FY2026

20.6%

20.5%

19.8%

CFO review

Page

12

Linked to remuneration

Headline earnings per share (EPS) growth

(Total Group)

Strong margins will convert revenue growth into earnings growth.

Medium-term target

>10%

We delivered strong headline EPS growth of +12.0%,

driven by operating profit growth, an enhanced share

buyback programme and contribution from

acquisitions.

FY2024

FY2025

FY2026

12.0%

14.8%

8.3%

CFO review

Page

12

Linked to remuneration

Headline return on capital employed (ROCE)

Premium return on capital ensures that both organic and inorganic

investment drive maximum value from our growth.

Medium-term target

>20%

ROCE decreased to 23.5%, comfortably above our

target range, with the higher profitability more than

offset by an increase in the capital base due to

acquisitions and an FX impact.

FY2024

FY2025

FY2026

23.5%

24.5%

24.0%

CFO review

Page

12

Headline operating cash conversion

Strong cash conversion enables investment in the business,

enhanced free cashflow and shareholder returns.

Medium-term target

~100%

We delivered strong headline operating cash

conversion at 96% driven by operating profit growth

and lower capital expenditure, offset by working

capital movement reflecting higher inventory levels

to support customers.

FY2024

FY2025

FY2026

96%

97%

93%

CFO review

Page

12

Linked to remuneration

KEY PERFORMANCE INDICATORS

Gross vitality (revenue contribution of products launched in the last five years) has been retired as a KPI due to portfolio change.

Alternative Performance Measures (APMs) and KPIs are defined in note 30 to the financial statements.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

19

Operational and non-financial KPIs

FY2026 progress

Performance

Recordable incident rate (RIR)

Looking after our colleagues in the workplace and keeping

them safe and healthy is our number one priority.

Target

RIR <0.4

RIR increased during the year with incidents

concentrated in recurring operational risks,

highlighting the need for stronger implementation of

critical controls. However, the longer-term trend

remains positive and Smiths continues to perform

significantly better than industry benchmarks.

FY2024

FY2025

FY2026

0.52

0.35

0.41

Safety

Page

24

Greenhouse Gas (GHG) reduction

Meeting our SBTi commitment to deliver Net Zero Scope 1 & 2

GHG emissions by 2040 is a fundamental part of our

sustainability strategy.

Scope 1 & 2 emissions fell 6% in the year driven by a

reduction in overall energy use, increased renewable

energy produced on site and overall grid

decarbonisation.

FY2025

FY2026

-6%

-16%

Climate change and

Net Zero

Page

31

Principal risk:

Climate change

Page

43

Linked to remuneration

My Say survey engagement score

Engaging our people is key to successful implementation of our

strategy. We have been tracking employee engagement on a

range of important cultural measures since 2017.

Target

Upper quartile (75+)

There was strong participation (85%) in the FY2026

survey and results point to a positive employee

experience despite many recent changes. Scores

improved on all seven measures.

FY2024

1

FY2025

1

FY2026

78

72

75

Culture and

sustainability

Page

22

Principal risk: People

Page

41

% of senior leadership positions held by women

We are focused on proactively increasing the number of women in

leadership roles at Smiths, with our measure being percentage of

senior leadership positions held by women.

40% of roles in our senior leadership team are held

by women.

FY2024

FY2025

FY2026

40%

37%

34%

Talent

Page

27

Principal risk: People

Page

41

1 Engagement survey data for FY2024 and FY2025 includes Smiths Detection and Smiths Interconnect.

KEY PERFORMANCE INDICATORS

CONTINUED

20

Smiths Group plc Annual Report FY2026

We take a disciplined,

commercially grounded approach

to sustainability, focused on

the issues that matter most to

our business, stakeholders and

wider value chain. Our culture is

a natural driver of sustainability

action and embedding

responsible practices, both of

which make the organisation

more resilient and able to create

lasting value. Investment in our

people and sustainability enables

the success of our strategy.

CULTURE AND

SUSTAINABILITY

Our sustainability disclosures are informed by current

and emerging reporting frameworks including the

Global Reporting Initiative (GRI), Sustainability

Accounting Standards Board (SASB), Task Force on

Climate-related Financial Disclosures (TCFD),

Taskforce on Nature-related Financial Disclosures

(TNFD), the Corporate Sustainability Reporting

Directive (CSRD), and the expectations of our

stakeholders. We continue to evolve our approach as

regulatory requirements and market practice develop.

The topics described in this section are the most

material for Smiths and its value chain.

Safety

Read more on

Page

24

Talent

Read more on

Page

26

Behaving ethically and legally

Read more on

Page

28

Sustainability solutions and eco-design

Read more on

Page

30

Climate change and Net Zero

Read more on

Page

31

Natural resources and biodiversity

Read more on

Page

32

Unless otherwise described, the data and targets

presented are for the continuing operations of Smiths.

FY2026 highlights

–

Improved MSCI rating to AAA

–

Increased Smiths Foundation fund to c.£25m

and developed STEM education scholarship

partnerships

–

More than 800 colleagues now certified Yellow Belt

under Smiths Excellence, 29 Black Belt and 212

Green Belt

–

Publication of Sustainable Product Policy and

Global Fleet and EV Policy

–

On track to achieve our three-year environmental

targets

Sustainability in our supply chain

Our global supplier network provides the materials,

components and finished goods that support both our

and our customers’ supply chains. Greater transparency

and stronger influence across these networks help us

manage risk, work with suppliers who share our Values

and commitments and progress our sustainability

goals. We use the EcoVadis supplier management

platform to manage supplier due diligence and explicitly

align suppliers with our ambitions.

United Nations Sustainable

Development Goals (UN SDGs)

Our business activities and our sustainability priorities

enable us to contribute in a meaningful and practical

way to seven of the UN SDGs.

Third party ratings

MSCI: AAA

CDP Climate: B

ISS QualityScore:

–

Environment: 1

–

Social: 2

–

Governance: 4

ISS Corporate: Prime

Sustainalytics: 29.2

S&P Global ESG Score: 53

LGIM ESG Score: 69

EcoVadis: Bronze 73/100

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

21

Our culture is founded on our Values and the key

drivers of success – innovation and Excellence.

To strengthen our culture, we focus on

engagement, communication and activities that

promote our culture through our shared purpose

and Values. The sustainability topics described in

this section also contribute to the strength of our

culture – Smiths colleagues care deeply about

safety, equal opportunities, ethical behaviour, the

environment and our communities.

CULTURE AND SUSTAINABILITY

CONTINUED

BUILDING OUR CULTURE

The Board has ultimate responsibility

for ensuring that our culture is healthy

and drives the long-term success of the

company. We have governance processes

in place to enable the Board to monitor

culture and cultural metrics.

Engaging our people

We work hard to engage our workforce at all levels

with our purpose and strategy. Key communication

materials are translated into fourteen core languages.

We run a global news platform, hold regular virtual and

in-person Town Halls, provide training on culturally

important matters, and our intranet web portal acts as

an online hub for information and resources.

My Say engagement survey

Our My Say survey helps us to understand what we are

doing well and where we need to focus attention, both

at a high level and in individual teams. There was strong

participation (85%) in the FY2026 survey and results

point to a positive employee experience despite many

recent changes.

Employees continued to rate safety, respectful

treatment, development opportunities and

environmental commitment highly. Safety remained the

highest-scoring area at 85, while the largest year-on-

year gains were in development opportunities (+13) and

mental wellbeing (+10), demonstrating meaningful

progress in areas central to culture, retention and the

overall experience. FY2025 comparative data includes

Smiths Detection and Smiths Interconnect.

Results from the survey and recommendations are

reported to, and discussed by, the Executive Committee

and the Board to ensure that they are reflected in our

planning. The outcome supports our continued

investment in leadership effectiveness, organisational

communication, employee wellbeing and workload

management.

Smiths Foundation

Launched in FY2024 with an initial £10m commitment,

the Smiths Foundation has supported our culture by

engaging colleagues and intensifying the social impact

of our charitable giving. To date, it has awarded

c.£3m to 32 colleague-nominated charities across

16 countries, supporting projects aligned to three

impact pillars:

–

Expanding access to quality STEM education and

skills for underrepresented groups

–

Strengthening safety and connectedness through

engineering and technology-led solutions

–

Advancing environmental sustainability through

engineering, technology and biodiversity restoration

Measure

Score

Change vs FY2025

Overall engagement

78

+6

Opportunities for personal development and growth

81

+13

Respectful treatment

81

+4

Commitment to mental wellbeing

75

+10

Commitment to safety

85

+3

Commitment to ethical behaviour

77

+6

Commitment to environment

81

+5

Customer Focus

We deliver, innovate

and grow with

our customers

Ownership

We are accountable,

capable & empowered

Respect

We build trust by

respecting others

Integrity

We win the

right way

Safety

We ensure safety

is our foundation

Read more about the

organisations supported

by the Smiths Foundation

on our website

22

Smiths Group plc Annual Report FY2026

CULTURE AND SUSTAINABILITY

CONTINUED

Data provided by the Foundation’s partner, Charities

Aid Foundation (CAF), found that more than 16,500

individuals had directly benefited from grants made in

FY2024 and FY2025.

In FY2026, to mark our 175th anniversary and our

founding in 1851, we expanded the Foundation’s

programme and specified three strategic funding

streams: scholarships and education, colleague-

nominated charities as previously, and biodiversity and

environment. The Board approved the retention of

£18.51m (reflecting our founding year) from the Smiths

Interconnect and Smiths Detection sale proceeds,

creating an ongoing combined invested fund of

c.£25m, providing a strong platform for long-term,

purpose-led impact aligned with our strategy, with

annual funding of £2-3m.

In scholarships and education, the focus will be on

scholarships for disadvantaged students pursuing

STEM-related degrees, delivered through long-term

partnerships with educational institutions and aligned

to priority skills needs. An initial partnership has been

formed with Aston University, UK. This will support 45

students a year with £225k committed per year for

three years, with each student offered mentoring from

Smiths. Our first cohort for the three-year programme

is being recruited for the 2026/27 academic year.

Similar partnerships are being discussed with further

education providers in the US and Mexico.

In biodiversity and environment, £200k funding has

been committed on an annual basis to support charities

focused on environmental protection, restoration and

biodiversity. We are a corporate supporter of the World

Land Trust (WLT) which protects land in key biodiversity

areas, and for the past two years have funded the

protection and conservation of land equivalent to our

global operational footprint +20%, to create wildlife

corridors in Uganda and Kenya. We have also partnered

with Treeapp, a global reforestation organisation, to

plant 15,000 coastal mangroves in a vulnerable region

in Brazil. A further 17,000 native trees will be planted in

autumn 2026 as part of a UK rewilding programme, one

tree for every Smiths colleague. Across the two

geographies, this is equivalent to reforesting an

estimated 213,440 m

2

of land.

Building Smiths culture in FY2026

A healthy culture needs continuous care and attention.

Here are some of the additional ways we built our

culture in FY2026:

–

Undertook a comprehensive culture review

to ensure we have a high performing culture

that supports the strategy. The assessment

involved the Executive Committee, Board and our

extended leadership team to determine strengths,

challenges, desired culture and the work needed to

prioritise the drivers of success

–

Our Business Presidents spent more time visiting

each other’s sites to better understand operating

models and opportunities for collaboration.

–

Board mentoring programme for the Executive

Committee

–

Celebrated 175 years and Smiths Day at our sites

–

Held two global leadership summits for our

extended leadership team

–

Expanded Learning & Development Week to

Learning & Development Month comprising more

than 100 sessions across four culturally important

areas: safety and wellbeing; Excellence and people;

learning and development; and business specific

–

Defined an innovation framework aligned to our

Excellence framework for application across the

product lifecycle

–

Celebrated colleague achievements on our Engage

social platform

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

23

CULTURE AND SUSTAINABILITY

CONTINUED

SAFETY

Safety comes first for everyone at

Smiths. We are focused on achieving

excellence in health and safety through

strong leadership, grassroots ownership

and a culture of care. By leveraging

Excellence methodologies and data-

driven insights we aim to continuously

improve safety performance and build a

strong foundation of confident and aware

safety cultures at our sites and injury-free

environments.

Managing safety

We embed our safety priority through clear policies,

robust standards and annual improvement plans at

each business and site. These plans support our target

to keep Smiths recordable incident rate (RIR) under 0.4,

below the industry benchmark, and our overall aim to

achieve an injury-free workplace. Day-to-day safety and

compliance are led locally by our HSE specialists, with

site and business leaders accountable for safety culture

and performance. Operational sites with more than 100

colleagues must be certified, or working towards

certification, under ISO 45001.

Our primary focus is on sustainable preventative action.

This starts with data analysis to identify patterns,

common themes, trends and anomalies that reveal

potential hazards and interrogate the effectiveness of

what we are doing.

Using this data we adopt proactive safety management

actions to educate and empower our teams, including:

–

Targeted safety stand downs in high-risk work

areas to reinforce fundamental control measures,

refresh frontline awareness and communicate

recent incident learnings

–

Focused hazard-specific sessions, such as

equipment interaction safety clinics, sharp-object

handling refreshers and slips/trips/falls walkabouts

–

Localised task-specific risk reviews, particularly

in machining, assembly and maintenance

environments where repeat events have emerged

John Crane undertook a global safety standdown in

January 2026 comprising 50 in person town halls and

over 40 online events to reinforce safety as a leadership

priority and the expected behaviours of all colleagues.

Both John Crane and Flex-Tek have completed

safety-specific Yellow Belt Excellence projects to

improve the efficiency of safety processes and

compliance.

In FY2027 we will implement a new federated health

and safety software tool which will integrate

standardised ways of working, reporting, compliance,

AI-enabled analytics and a simple user experience for

improved capture, understanding and action on safety.

The tool will also support faster roll out of the Smiths

safety culture to new acquisitions.

Health, mental health and wellbeing

Supporting colleague wellbeing and mental and

physical health helps keep us performing at our best.

We strive to create a fair, inclusive and respectful

workplace where colleagues feel they belong and are

valued. This culture of care improves quality of life and

strengthens our business.

We are taking a more holistic health, safety and

wellbeing approach that brings together physical safety,

psychological safety and overall wellbeing. We have

enhanced leadership capability through bespoke people

leader wellbeing training and practical tools such as

the See, Explore, Encourage (SEE) framework (800

attendees in FY2026). In addition, the enterprise wide

rollout of Safety & Wellbeing Fundamentals training,

now completed by 87% of colleagues, and the safety

week in Learning & Development Month have

established a consistent baseline of safety and

wellbeing knowledge at the grassroots.

All Smiths colleagues and their immediate families

have access to an Employee Assistance Programme

(EAP) which offers practical support on health,

wellbeing and financial matters to support individuals

through difficult situations in their work or personal

lives. Our EAP providers also accommodate Smiths

corporate and site needs – for example by providing

bespoke training sessions and materials, crisis

response teams and onsite counsellors should they be

required. Colleagues based in markets where the local

health system is not of acceptable quality or where

health insurance is the norm benefit from private

healthcare and other support through private health

insurance. We have mental health first aiders at some

of our sites.

Target:

– Continuous

improvement towards a

zero-harm workplace.

RIR <0.4

UN SDGs:

24

Smiths Group plc Annual Report FY2026

CULTURE AND SUSTAINABILITY

CONTINUED

Safety performance

While our FY2026 RIR has not shown the improvement

we targeted, the long-term trend is positive and we

consistently average lower than the Industrial

Manufacturing & Services benchmark. We were

extremely pleased to see a continuing strong score for

safety in our FY2026 engagement survey and a

significantly improved score for mental wellbeing.

Site security and travel safety

The challenging geopolitical environment requires

constant focus to protect our sites and anyone

travelling. Security plans, risk assessments, business

continuity planning and crisis management reviews are

applied across our locations to protect our people,

assets, data and intellectual property. In FY2026 we

‘geofenced’ our key global locations to enable real-time,

high quality security analysis and communication from

our external security partners to enhance protection.

We also deployed a standard security incident reporting

template to drive consistency in method, data and

preventative action. We recorded only one serious site

security incident in the year caused by an external

perpetrator.

Travel safety is also closely managed, with high and

extreme risk trips monitored and requiring senior

approval. Our external partners provide advisory,

emergency and medical support, including evacuation

if necessary, directly to company travellers. Conflict in

the Middle East during the year has led to additional

safety and security measures for colleagues travelling

and working in the region, including extra layers of

approval for a period of time. We always put our people

first in such circumstances.

FY2027 priorities

–

Implement and deploy new safety software tool,

including standard safety incident reporting

template

–

Continued focus on targeted improvements to

controls around higher-risk tasks, and on reducing

severe and higher-frequency incidents

–

Continue to raise the profile of safety responsibility

and prevention at the grass roots through

accessibility of data and insights, training and

awareness activities, and the opportunity to

participate in Excellence projects

–

Speedy implementation of Smiths safety culture at

acquired businesses

FY2026

FY2025

FY2024

Recordable injuries

53

35

42

Recordable incident

rate per 100 employees

0.52

0.35

0.41

Lost time incident rate

per 100 employees

0.28

0.10

0.21

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

25

CULTURE AND SUSTAINABILITY

CONTINUED

TALENT

The passion and expertise of Smiths

colleagues have driven our business

forward for 175 years. Their talent and

leadership are critical for our future.

Our talent strategy is focused on building the

capabilities and bench strength required to deliver

our strategic plan. We are prioritising the skills and

leadership qualities that matter most to future

performance, including innovation, technical expertise,

strategy, programme management, enterprise IT

and Excellence. This capability agenda is supported

by structured skills roadmaps that identify needs

and direct investment and resource to have the

most impact.

We are strengthening capability by better equipping our

leaders to coach, develop and sustain improvement

across their teams and by building knowledge and

skills at the grassroots, including through our

Excellence programme. Learning paths will be

increasingly aligned to job architecture, creating clearer

routes for colleagues to upskill and progress into future

roles. This will also enhance opportunities for

collaboration and internal mobility, creating the right

balance between individual growth and business needs.

Our technical capability programmes will be embedded

into business as usual, owned by our businesses, so

that development becomes part of how we operate, not

a separate activity.

A key imperative is to establish deeper succession

pipelines for leadership and critical skills to create

pools of talent for future resilience and an

understanding of the gaps we need to fill. We will

supplement internal development with targeted

external recruitment in priority capability areas and

early careers.

To support delivery we are investing in the Workday

system to manage and support talent holistically

across the organisation. Workday will improve our

people data, insights, workforce planning, and co-

ordinate and systematise our processes. It will also

empower our people, giving direct access to mentoring

matches and self-directed LinkedIn Learning

development modules, and managers access to data.

We have also established a new office in Birmingham to

strengthen long-term operational resilience and

diversification. Birmingham was selected for its access

to a broader and more diverse talent pool, its strong UK

connectivity and significant engineering and industrial

expertise. The office will support the development of

functional centres of excellence in IT, procurement,

data and analytics, project management and more,

while enhancing recruitment and capability building,

including in early careers.

Talent initiatives during FY2026 include:

–

Completed roadmaps for product, technology,

manufacturing, process and materials. These map

our business priorities over five years and identify

capability gaps

–

Established a Technology Steering Group for

business collaboration, knowledge sharing and

external engagement

–

Completed four technology projects and two

discovery visits with the UK Manufacturing

Technology Centre (MTC)

–

Learning & Development Month

–

A deliberate shift of the Excellence programme

from project-led Six Sigma to Lean-first daily

value creation with broad-based problem-solving

capability at the grassroots. This is supported by our

business-wide Lean Academy alongside role-based

learning pathways for Excellence roles hosted

in our learning management system. Nearly 400

Yellow Belt projects were registered during the year,

with more than 800 colleagues now qualified Yellow

Belts. 84% of colleagues have completed Excellence

Fundamentals training

–

Redesigned the talent cycle to enable a more

strategic, enterprise-wide discussion on leadership

capability, succession and future organisation needs

and adopted a model of potential that assesses and

discusses aspiration, future ability and engagement

–

Piloting of a new 12 month high-potential

programme focused on innovation and strategic

insights to elevate the senior leaders of the future

–

Continued support for individual professional

development including through Henley Business

School and Exeter University

–

Continuation of early careers programmes and

expansion of UK apprenticeships and learning

opportunities funded by the Apprenticeship Levy.

We currently have 83 colleagues enrolled in

graduate and apprenticeship programmes globally

Recent efforts have led to a significant increase in

our engagement survey score for opportunities for

personal development and growth, now scoring 81

(+13 on FY2025). Respectful treatment also scored 81

(+4 on FY2025).

FY2027 priorities

–

Implement Workday people management system

–

Broaden bespoke support for senior leadership in

Executive Committee succession pipeline

–

Roll out operational coaching training for leaders

to support empowerment, accountability, people

development and sustained improvement

–

Relaunch Green and Black Belt Excellence training

to continue to grow belted population and mature

capability

UN SDGs:

26

Smiths Group plc Annual Report FY2026

CULTURE AND SUSTAINABILITY

CONTINUED

Reward and recognition

Fair, open and meaningful reward and recognition help

us attract and retain talent. We are committed to fair

pay, rewarding colleagues equitably for their work and

performance, and enabling them to share in our

success. Benefits are aligned across Smiths and

include parental leave, the option to request part-time

or job-share working, and a paid volunteering day. More

than 2,800 colleagues participate in our Annual

Incentive Plan (AIP). We have been an accredited Living

Wage employer in the UK since 2018, and our UK

all-colleague Sharesave Scheme enables colleagues to

buy Smiths shares at a discount.

Equal opportunities

We provide equal employment opportunities,

recruiting, supporting and promoting people based on

qualifications, skills, aptitude and attitude. We comply

with applicable anti-discrimination requirements and

have zero tolerance for discrimination, harassment or

retaliation. Our procedures and training reinforce fair

treatment for all, supported by gender-neutral job

descriptions. People with disabilities are given full

consideration for employment and subsequent training

(including retraining, if needed, for people who have

become disabled), career development and promotion

based on their aptitude and ability. We endeavour to find

roles for those who are unable to continue in their

existing job because of disability.

Parker Review disclosure

Smiths has sought ethnic diversity data from its UK

senior management group as defined by the Parker

Review and set an FY2027 target. 77% of the population

responded to the FY2026 request, with 13% of

respondents identifying as ethnically diverse. Our

definition of ethnically diverse covers groups with lower

representation in the organisation including Asian,

Black and mixed multiple ethnic backgrounds.

Gender disclosures

As at 31 July 2026

Male # of employees

Female # of employees

Definition

Board of Directors

6

75%

2

25%

Executive Committee

6

86%

1

14%

Senior Leadership Team

31

60%

21

40%

Senior Leadership Team is the metric used to track gender diversity at Smiths. It is

defined as all colleagues on permanent and fixed-term contracts in senior leadership

roles. These colleagues are able to influence and drive business results.

Total colleagues

7,593

73%

2,842

27%

Employees on permanent and fixed-term contracts.

Senior managers (Companies Act)

106

82%

24

18%

Executive Committee plus directors of subsidiary undertakings as defined by the

Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.

Senior managers (UK Code)

35

63%

21

38%

Executive Committee, including the Company Secretary, and their direct reports as

defined by the UK Corporate Governance Code 2024.

Women in Leadership

35

63%

21

38%

Executive Committee and their direct reports as defined by FTSE Women Leaders.

Percentages have been rounded and may not add up to 100%.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

27

Target:

–

40% of supplier spend

evaluated on EcoVadis by

end of FY2027

UN SDGs:

CULTURE AND SUSTAINABILITY

CONTINUED

BEHAVING ETHICALLY AND LEGALLY

Our Values drive ethical behaviour

across Smiths. Operating globally across

different product markets demands

rigorous compliance with local and

international requirements. This is

supported by specialist teams who use

data and intelligence to anticipate risk and

strengthen our procedures. Our policies

and controls evolve with the external

environment, our strategic priorities and

the insights we gather.

Governance and implementation

The Smiths Code of Business Ethics sets the standard

for how we behave and what we expect from our

partners. It is supported by targeted policies,

procedures and training across ethics, compliance and

people matters. Our central Ethics & Compliance team

oversees the programme and focuses effort where risk

is highest, while business teams own day-to-day

delivery. Our Business Ethics Council, made up of

senior leaders from across Smiths, provides a forum

to surface emerging issues, share insights and

shape policy.

Our ethics training operates in two tiers – online

modules delivered in all our core languages, and group

training activities covering specific subjects for relevant

cohorts. We also run regional ethics workshops as

appropriate for middle and senior leaders to embed

deeper understanding and discuss challenges specific

to our markets and geographies. In FY2026 we ran an

ethics workshop for our John Crane operations in

Southeast Asia and a Smiths-wide workshop focused

on China. As part of our assurance programme, our

external partner Control Risks conducted an anti-

bribery and corruption and fraud risk review of our

businesses in Japan and identified no material risks.

Data and insights

Colleagues and business partners are expected to

report any activity or behaviour that may breach our

Code of Business Ethics, policies or Values. They can do

this through internal channels or our confidential Speak

Out hotline, available to colleagues and third parties

24/7. We also run a regular global Ethics Pulse survey,

with results and Speak Out data reported to the Audit &

Risk Committee.

There were 198 Speak Out reports in FY2026. 37% of

reports relating to ethics and compliance matters

were substantiated or partially substantiated and

recommendations were passed back to the business

area to address. Reporting appears generally stable,

with a slightly lower-than-average number of HR/

culture reports following the announcement of the sale

of Smiths Detection and Smiths Interconnect.

Commitment to ethical behaviour scored strongly in

the FY2026 engagement survey.

We are developing an AI-enabled early warning

indicator that analyses data from our compliance

ecosystem to flag trends and potential risks. We see

further opportunities to integrate datasets from

Internal Audit and the new systems planned in HR

and safety.

Responsible procurement

Our Supplier Code of Conduct sets clear expectations

for suppliers and sub-suppliers on ethical behaviour,

legal compliance, treatment of personnel and

responsible sourcing. Suppliers must adhere to the

code, with new suppliers subject to due diligence and

onboarding checks to assess risk and confirm they can

meet our standards. Risk reviews and regular audits

provide ongoing assurance.

EcoVadis gives us a consistent platform to assess

suppliers across four sustainability pillars:

environment, labour and human rights, ethics and

compliance, and sustainable procurement, while

reflecting industry and country risk. Through the

platform we collect, validate and report supplier

data, and set corrective action plans aligned to our

priorities. By the end of FY2026, 35% of supplier spend

had been evaluated on EcoVadis. We intend for all

supplier onboarding to take place using EcoVadis.

Smiths own score on the EcoVadis platform is currently

bronze (73/100).

We have developed an AI-enabled ESG FAQs model

covering our policies and performance to better

enable our teams to provide accurate and efficient

responses to the growing number of ESG

questionnaires from our customers.

28

Smiths Group plc Annual Report FY2026

CULTURE AND SUSTAINABILITY

CONTINUED

Conflict minerals

Our Responsible Minerals Sourcing Policy addresses

our commitment to the sourcing of minerals in an

ethical and sustainable manner that safeguards human

rights. It also ensures that tin, tungsten, tantalum, gold

and cobalt are sourced with due respect for human

rights and in a manner that does not finance armed

groups. To achieve this objective, we take guidance

from the OECD Due Diligence Guidance for Responsible

Supply Chains of Minerals from Conflict-Affected and

High-Risk Areas.

Human rights and modern slavery

Human rights violations are unacceptable and wholly

inconsistent with our Values and policies. We do not

tolerate conduct that exploits workers or denies them

their legal rights and benefits. We recognise our

responsibility to help uphold decent work and universal

human rights across our operations and supply chains.

All online colleagues receive training on modern

slavery risks. We have not identified any serious human

rights issues in our operations or in those of our

suppliers in FY2026.

Our Human Rights Policy is grounded in international

principles, including the Universal Declaration of

Human Rights and the UN Guiding Principles on

Business and Human Rights. We comply with local

laws in the markets where we operate and, where

national laws conflict with internationally recognised

human rights, seek ways to honour those principles.

Everyone working for, or on behalf of, Smiths must

follow our policy which covers:

–

Elimination of forced/involuntary labour

and child labour

–

Humane treatment in the workplace

–

Workplace equality/elimination of bias

–

Right to a living wage, reasonable working hours

and vacation

–

Freedom of association

–

Safe and healthy workplace and safe and healthy

accommodation if accommodation is provided

for employees

We expect suppliers to share our commitment and

operate free from practices linked to human rights

violations. We take any allegation seriously and remain

vigilant across our global supply chains. Our standard

supplier contracts require commitments on human

rights and fair labour standards, including equivalent

expectations for suppliers’ own supply chains and

notification of any breach. During onboarding, we

review working and, where relevant, housing

conditions, employment terms and labour practices.

For migrant workers, we ask about employment terms,

movement restrictions and financial arrangements.

Recruitment agencies are also subject to due diligence

and must commit to our standards.

In FY2026 we conducted a strategic assessment to

define the most effective, risk-based, and proportionate

approach for evaluating compliance among Tier 2

suppliers based on their assessment in EcoVadis and

undertook deep-dives on compliance in Mexico. Two of

our own sites in the region were assessed as part of the

deep-dive based on Speak Out reporting rates but no

major issues were found.

Anti-bribery and anti-corruption

Our Code of Business Ethics sets the foundation for

preventing bribery and corruption across Smiths. This

is reinforced by targeted policies and procedures for

higher-risk activities, together with an overarching

Anti-Bribery and Corruption Policy that brings our

approach together in one clear framework. Our

controls cover gifts, meals and hospitality; interactions

with government officials; facilitation payments; and

the appointment of distributors and agents, customs

brokers and freight forwarders. In FY2026 we added

online anti-fraud training for all online colleagues.

Data protection and privacy

Smiths does not collect consumer information or

market to consumers, thus reducing these risks;

however, we do process colleague data and information

on business contacts. Common principles and

processes ensure our teams understand their personal

data responsibilities, with privacy matters overseen by

the Ethics & Compliance team. Our Privacy Champions

monitor evolving regulation and emerging issues, while

Internal Audit assesses our data privacy controls. With

ever increasing data, systems and the integration of

AI, data protection is evolving into more formal

frameworks for data management, system security

and behaviour under our IT, business continuity and

Ethics & Compliance teams.

FY2027 priorities

–

Based on our risk review, identify suppliers for

anti-modern slavery compliance audits

–

Conduct a review of our anti-fraud controls

–

Conduct regional ethics workshops for businesses

recently acquired and for colleagues in Czechia

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

29

CULTURE AND SUSTAINABILITY

CONTINUED

SUSTAINABILITY SOLUTIONS AND ECO-DESIGN

Our markets are being reshaped by

demand for cleaner, more efficient

technologies that enhance process

resilience and sustainability. Our

businesses meet this need with high-

performance solutions that cut emissions

and pollution, enable electrification,

reduce waste and support infrastructure

to stay reliably in service for longer.

John Crane

John Crane mechanical seals and couplings prevent

pollution and greenhouse gases, including methane,

from leaking into the environment during the

transportation and refining of fossil fuels, making

infrastructure systems more efficient, and reducing

environmental impact, including water consumption.

The same technology is deployed in hydrogen and

carbon capture projects where performance demands

are even higher. In both new and core energy systems,

our technology is supported by service teams that keep

our seals and the infrastructure they protect, operating

efficiently and reliably, extending equipment life.

John Crane is currently pursuing a pipeline of project

opportunities in energy transition markets as those

markets grow. Recent examples include the supply of

dry gas seals for use in centrifugal compressors at a

new carbon dioxide compression facility in north Wales

to transport carbon dioxide captured from industrial

plants in the region to permanent storage in depleted

offshore fields. In the US, John Crane was selected to

supply a comprehensive suite of sealing technologies for

turbomachinery at a next generation geothermal power

generation project, ensuring operational reliability and

safety in a technically demanding environment.

Flex-Tek

Flex-Tek industrial electric heating technology enables

the heating of industrial gases for applications that

need high pressure or high temperatures or both, with

the potential to facilitate the decarbonisation of

industries currently reliant on fossil fuels, like steel.

Our lower range heating technology is used in

applications in emerging markets for dehumidification,

pollution control and energy storage. Flex-Tek products

are also transforming residential and commercial

building efficiency and emissions through off the peg

solutions for the construction industry supporting

HVAC systems and electrical heating.

Flex-Tek is well placed for further energy-efficient

industrial heating and cooling projects following the

acquisitions of Wattco and DRC including the provision

of electric heating and cooling for ultra-low emission

electro-fuel and data centre projects.

Circularity and eco-design

Our products and services score strongly on the key

pillars driving new EU regulations on sustainable

product design – particularly durability, reusability and

repairability. Our significant aftermarket services

revenue at John Crane derives from keeping our

products operating efficiently in service for longer thus

limiting unnecessary waste. We are pursuing similar

aftermarket expansion projects at Flex-Tek’s Thermal

Solutions and Aerospace businesses.

In preparation for new EU regulatory frameworks –

Ecodesign for Sustainable Products Regulation (ESPR),

Packaging and Packaging Waste Regulation (PPWR)

and the Corporate Sustainability Reporting Directive

(CSRD) – and to meet customer needs, we are on a

journey to formally embed eco-design compliance

requirements into our new product development

process. Lifecycle sustainability questions and data

gathering covering materials, durability, energy

efficiency, packaging, repairability, recyclability and end

of life are being built into appropriate gates in the

process. We have also launched a Sustainable Product

Policy. This work is led by our manufacturing

Excellence team alongside technical teams at our

businesses and the Smiths sustainability team.

EU Taxonomy

We have completed work with PwC to assess the

eligibility of our CapEx, OpEx and Revenue in

preparation for EU Taxonomy reporting. We are

now in the process of systematising our reporting

processes and embedding EU Taxonomy reporting

into our financial reporting system. This work

supports our decision to voluntarily align with

investor requests for green revenue reporting and

helps prepare the business for future reporting

requirements under CSRD.

FY2027 priorities

–

Implement training for NPD compliance with

Sustainable Product Policy

UN SDGs:

30

Smiths Group plc Annual Report FY2026

We are committed to Net Zero and

mitigating climate change by changing

how we operate and power our

businesses. We are targeting Net Zero

Scope 1 & 2 emissions by 2040 and Net

Zero Scope 3 emissions by 2050.

Our targets and transition plan were validated by the

Science Based Targets initiative (SBTi) in FY2024. We

plan to resubmit to the SBTi for the current Smiths

portfolio in FY2027, retaining the same targets.

We continued to score highly for commitment to the

environment in our engagement survey, now at 81 (+5

on FY2025).

The Watershed sustainability platform strengthens our

energy, GHG, water and waste reporting and audit

practices, and supports effective modelling and

targeted action. The data in this report uses

Watershed’s global standard methodology.

Scope 1 & 2 emissions

We have consistently reduced operational emissions

through energy efficiency, green electricity tariffs, solar

self-supply and electric vehicles. Each business has a

bespoke emissions reduction plan, supported since

FY2023 by a demanding energy reduction metric linked

to our Annual Incentive Plan. We have had emissions

reduction targets linked to our Long-term Incentive

Plan (LTIP) since FY2022. See page 52 for performance

against these targets.

Scope 1 & 2 emissions fell 6% in the year.

CULTURE AND SUSTAINABILITY

CONTINUED

Journey to Net Zero

Energy reduction

Energy use under our energy reduction metric fell by

5% in FY2026. All sites work to reduce day-to-day

energy use. Flex-Tek completed many projects during

the year, ranging from door and lighting upgrades to a

major Thermaflex oven insulation project in which the

pilot cut exterior oven temperatures by more than 30°C.

This will improve safety, reduce HVAC load and deliver

meaningful energy savings when implemented across

the oven fleet.

Renewable electricity

75% of our operational electricity now comes from

renewable sources through green tariffs and solar

self-supply. We have four solar installations, including a

500MWh project completed at Flex-Tek Changshu

during the year. To increase our renewable electricity

share and strengthen the quality of our GHG reduction

pathway, we are looking to close Virtual Power

Purchase Agreement (VPPA) contracts in both Europe

and the US.

Vehicle fleets

In FY2026 we launched a Smiths-wide Global Fleet and

EV Policy to reduce emissions and improve efficiency.

Over the next five years we will:

–

Transition away from diesel vehicles where market

conditions allow

–

Prioritise electric and low-emission vehicles with

50% of our global fleet electric or hybrid

–

Simplify fleet operations, standardise vehicle

models and consolidate suppliers for cost and

environmental efficiency

–

Ensure 50% of our employees have access to an on-

site EV charging point

John Crane has completed a detailed review of its global

vehicle fleet of more than 800 vehicles and set a regional

roadmap to align with the new policy. Some petrol and

diesel vehicles will remain necessary for customer sites

where electric or hybrid vehicles cannot operate.

Scope 3 emissions

Our Scope 3 path to Net Zero is based on supplier

engagement and reporting, supplier science-based

targets and grid decarbonisation.

EcoVadis helps us engage more deeply with suppliers,

including upstream and downstream logistics providers,

and target reductions in Categories 1, 4 and 9. We aim to

have 25% of supplier spend with suppliers committed to

SBTi targets by FY2027 (9% in FY2026). We are also using

Watershed hotspot analysis to target Scope 3

improvements, alongside Excellence projects that reduce

scrap and waste. The circularity and eco-design work

described on page 30 will support longer-term

reductions in Category 11 emissions.

Scope 3 emissions increased slightly year-on-year,

reflecting continued business growth and the acquisition

of DRC in Flex-Tek. The increase was also driven by

greater spend across operating expenditure categories.

FY2027 priorities

–

Deep-dive on Scope 3 emissions and reduction

priorities for current portfolio

–

Re-submit to the SBTi including re-baselining and

defining a clear Transition Plan Taskforce-aligned

transition plan for Scopes 1, 2 and 3

–

Revisit climate-related scenario analysis

–

Implement Global Fleet and EV Policy

CLIMATE CHANGE AND NET ZERO

Targets:

–

Net Zero Scope 1 & 2

emissions by 2040

–

Net Zero Scope 3

emissions by 2050

–

2% reduction in energy

use FY2026 vs FY2025

–

80% renewable

electricity by FY2027

–

Scope 1 & 2 emissions

SBTi trajectory

–

25% of supplier spend

committed to SBTi

targets by FY2027

UN SDGs:

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

31

CULTURE AND SUSTAINABILITY

CONTINUED

NATURAL RESOURCES AND BIODIVERSITY

Natural resources are finite, and how

we use them matters. We are focused

on sourcing responsibly, reducing

consumption, preventing pollution and

limiting biodiversity impacts across

our operations and value chain. This

builds on our longstanding commitment

to non-GHG resource targets, strong

environmental standards and responsible

stewardship.

Environmental management

Our environmental and safety standards ensure we

manage sites responsibly and mitigate pollution and

safety risks from our activities and use of controlled

substances. Performance is monitored through

internal audit and an external environmental

compliance audit programme. All operational sites with

more than 100 colleagues must be certified, or working

towards certification, under ISO 14001.

Our businesses also share best practice through

regular forums to support compliance with global

restricted and controlled substance regulations

including WEEE, RoHS, Prop65, REACH, TSCA and

Responsible Minerals. We had no spills and one

environmental compliance penalty in FY2026.

Water, waste and packaging

We continue to reduce unrecycled waste, water use and

unnecessary packaging across our operations. Our

three-year targets cover waste reduction, water use in

water-stressed areas, and waste/circularity and

biodiversity/water projects. A project tracker records

site-level actions and helps maintain momentum, with

many projects delivered using Smiths Excellence tools.

Our water-stressed site list is updated dynamically.

Recent projects include:

–

John Crane’s Czechia site replaced the 17kg wooden

crate used for shipments to Australia with a paper

based carton solution weighing only 7kg, reducing

packaging material consumption and waste as well

as freight costs

–

Flex-Tek Aerospace’s Kreisler site installed a water

distillation process that cut monthly water spend

from $10k to $600

To prepare for the EU Packaging and Packaging Waste

Regulation (PPWR), we are collecting packaging data

across all EU sites to support conformity declarations.

In FY2026, normalised water use in water-stressed

locations fell 2.2% and normalised waste disposal fell

16.8%. We recorded five water projects and 17 waste/

circularity projects during the year.

Nature and biodiversity

We are committed to understanding and addressing the

biodiversity-related impact of our products, our

operations and our supply chains in a proactive manner.

Since 2024, all sites under operational control have

been evaluated annually for biodiversity-related

impacts and their proximity to critical or high

biodiversity value habitats using the WWF Biodiversity

Risk Filter Suite Tool and other complementary tools.

This analysis is refreshed each year. To date we have

never operated in a key biodiversity hotspot area.

Biodiversity and nature considerations are also

factored into business decision-making such as the due

diligence process for selecting new sites and EcoVadis

supplier questions.

We recorded ten biodiversity improvement projects

during the year.

As described on page 23 biodiversity and environmental

improvement are one of the three funding routes

chosen for the Smiths Foundation. We are a corporate

supporter of the World Land Trust (WLT) to protect land

in biodiversity-sensitive areas, and we will have planted

32,000 trees with Treeapp in Brazil and the UK by the

end of 2026.

FY2027 priorities

–

Deep-dive water-stress analysis at each of our sites

–

Publish water stress policy and mitigation for sites

in water-stressed regions

–

Install more water meters to improve data and

visibility of water use

FY2026 vs FY2024

Normalised water use in stressed areas (7 locations

1

)

(6.9)%

Normalised waste disposal

(10.0)%

FY2025 – FY2026

Waste/circularity projects

31

Biodiversity – water projects

14

1 Updated annually based on the World Resources Institute (WRI) Aqueduct tool.

Targets:

–

5% reduction in water

use in water-stressed

areas normalised to

revenue FY2025 to

FY2027

–

5% reduction in waste

disposal normalised

to revenue FY2025 to

FY2027

UN SDGs:

32

Smiths Group plc Annual Report FY2026

Effective risk management

is integral to how we deliver

sustainable growth and long-

term value. It supports strategic

execution, strengthens resilience

and helps us respond decisively to

an evolving external environment.

Our approach reflects the structure of Smiths

and the markets in which we operate. Our

enterprise-wide framework provides a clear

and consistent basis for identifying, assessing

and managing risk, while our operating model

supports timely, risk-informed decision-

making by those closest to the business.

Following the completion of our portfolio

reshaping, Smiths is now a focused, premium

industrial engineering company centred on

John Crane and Flex-Tek. As a result, our risk

profile is concentrated in the end markets,

technologies and operating capabilities of

those businesses. Risk management

therefore remains central to how we protect

performance, support execution and position

Smiths for long-term value creation.

MANAGING

OUR RISKS

Our approach to risk management

Risk management is embedded across the

organisation. Our businesses and functional teams are

responsible for identifying and managing risk at source,

enabling timely escalation and informed decision-

making. This local accountability is aligned with our

Values and is reinforced through our policies, controls

and governance processes.

We take a balanced and forward-looking view of risk.

Well managed risk taking supports innovation, growth

and disciplined capital allocation. Our framework

considers both downside exposure and the

opportunities associated with strategic change,

technology development, market evolution and

sustainability.

Our enterprise risk management (ERM) framework is

integrated into our strategic planning, capital allocation

and operational management processes. This helps

ensure that material risks are considered alongside

performance, investment and execution decisions.

Governance and oversight

The Board has overall responsibility for risk oversight

and sets the tone from the top, including the Smiths risk

appetite and expectations for governance and culture.

The Executive Committee is responsible for embedding

the ERM framework and ensuring it is applied

consistently. The Audit & Risk Committee reviews the

effectiveness of our risk management and internal

control systems. Internal Audit provides independent

assurance over key risk areas, processes,

programmes and controls.

This governance structure supports effective

communication between the Board, Audit & Risk

Committee, Executive Committee and local teams,

helping ensure that risk insight, escalation and action

are appropriately coordinated.

Our ERM framework

The development of the Smiths ERM framework is the

responsibility of the Executive Committee which

ensures it is effectively deployed throughout the

business. The model is based on ‘Three Lines of

Defence’ with processes in place to support open

communication on risk between the Board, the Audit &

Risk and Executive Committees, our businesses,

functions and sites. It enables us to identify, manage

and monitor opportunities and risks which could

threaten the successful execution of our strategy and

ensures our strategic, financial, compliance and

operational risks are appropriately considered by the

Executive Committee and the Board. In FY2026, the

principal risk register and all business risk registers

were refreshed to ensure the most current insights

were captured. In addition, 15 operational risk

workshops were facilitated at key sites to enhance our

bottom-up view of risk and ensure strong local

engagement in the process.

Emerging risks

Emerging risks and horizon scanning form part of our

ERM process. Activities take place across our

businesses and functions to identify developments that

could affect our strategy, operations or stakeholders

over time.

Current areas of focus include the evolving geopolitical

and trade environment, cyber threats and third-party

dependency, regulatory developments, restricted

substance regulation, artificial intelligence, and the

implications of climate transition and physical climate

risk.

Material controls

We continue to strengthen our approach to material

controls in preparation for reporting requirements

under the UK Corporate Governance Code which

Smiths will need to comply with for the year ending

31 July 2027. During the year, we progressed our work

to identify and refine the controls that are most

important to the resilience of the company across

financial, operational, reporting and compliance risk.

This work builds on our existing global controls

framework and is intended to support a more

consistent, evidence-based view of the controls that

matter most to the delivery of our strategy and the

resilience of Smiths.

The Directors consider the risk management process

to be effective.

ERM framework

See our ERM framework

Page

34

Audit & Risk Committee

Read more about

Board oversight of risk

management and internal

control in the Audit & Risk

Committee report

Page

69

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

33

MANAGING OUR RISKS

CONTINUED

Accountability and reporting

Governance and oversight

3RD LINE

Internal Audit

–

Provides independent and objective assurance on internal controls, programmes, systems

and risk management processes

–

Facilitates the ERM process and provides site-based controls and assurance reviews of key

programmes, processes and systems

2ND LINE

Executive Committee and senior management

–

Design and establish risk management and internal control systems

–

Ensure that the risk appetite of the Board is understood by risk owners and decision makers

–

Ensure risks are adequately managed

–

Conduct an annual assessment of strategic risk

Risk and compliance functions

–

Develop and manage the ERM process

–

Monitor risks and testing of critical controls

–

Develop and manage policies and control frameworks

–

Ensure ﬁnancial, legal and ethical compliance

–

Ensure security, quality and health and safety

Business management

–

Set business strategic objectives

–

Identify, manage and escalate risks

–

Establish and apply internal control systems

–

Escalate issues to the Executive Committee as required

1ST LINE

Operational teams

–

Understand roles and responsibilities

–

Comply with policies

–

Follow risk management processes

Operational risks

RISK

CULTURE

RISK

IDENTIFICATION

GOVERNANCE

Board

–

Approves the strategy

and sets the culture and

risk appetite of Smiths

–

Monitors these through

Board processes and

good governance

Audit & Risk Committee

–

Reviews and assesses

the effectiveness of the

ERM framework and

ﬁnancial and non-

ﬁnancial internal control

systems

Strategic risks

Enterprise risk management framework

34

Smiths Group plc Annual Report FY2026

We maintain a register of principal risks and

uncertainties that could materially impact Smiths

financial performance, operations and achievement of

strategic objectives.

Risk review process

On an annual basis, we review each principal risk and

assess gross impact, assuming no mitigating controls

are in place, and residual impact and likelihood after

taking account of existing mitigations. We also consider

reputational impact and velocity, which reflects the

speed at which a risk could crystallise. Together, these

inform our risk priorities and mitigation activity. A trend

metric shows the net position of the risk year-on-year.

We report on the connectivity between risks to help

understand the potential for one risk to have an impact

on another. This is presented against each risk in the

form of a ‘risk relationship’ chart indicating the linkage

between each principal risk and others on the list. This

has been used as an input to the Viability Statement

assessment and for risk scenario planning and

mitigation work.

Changes to principal risks

Our principal risks continue to evolve in line with the

external environment and the shape of the business.

During the year, the most significant change has been

the completion of our portfolio reshaping to position

Smiths as a focused, premium industrial engineering

company. Our principal risks are now aligned to this

model and are framed around John Crane and

Flex-Tek.

Strategic transformation remains a principal risk.

However, its emphasis has evolved to focus on the

delivery of growth targets, the effectiveness of

deploying capital, and the scaling of innovation

capability. While we continue to monitor and manage a

wide range of risks, the tables that follow summarise

those risks considered to have the greatest potential

impact if they were to materialise.

PRINCIPAL RISKS

AND UNCERTAINTIES

Principal risks and uncertainties

Principal risk

Gross risk

Residual risk

Likelihood

Velocity

Trend

1. Economy and geopolitics

Economy and geopolitical environment

High

Moderate

Almost

certain

Days

2. Cyber security

Enterprise or product cyber event

High

Moderate

Almost

certain

Days

3. Business continuity

Business disruption to supply chain or operations

High

Moderate

Probable

Weeks

4. Technology

Disruption by existing or future competitors

Very high

Moderate

Probable

Years

5. Product quality

Failure of product causes serious harm to people/

property

Moderate

Low

Probable

Weeks

6. Commercial

Loss of focus on customers, not competing in the right

markets

High

Low

Possible

Years

7. People

Ability to attract and retain people

Moderate

Low

Probable

Months

8. Legal and compliance

Significant ethical breach or failing to meet contractual

obligations

High

Low

Possible

Days

9. Climate change

Missed opportunities in energy transition and change in

climate conditions causing business disruption and

economic loss

High

Low

Possible

Years

10. Strategic transformation

Failure to deliver required growth targets post-

transformation

Very high

High

Possible

Months

Key

Likelihood

Almost certain

>80%

Likely

>60%

Probable

>40%

Possible

>20%

Unlikely

<20%

Trend year over year

Stable

Up

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

35

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

Connectivity between principal risks

Principal risk

Economy and

geopolitics

Cyber security

Business

continuity

Technology

Product quality

Commercial

People

Legal and

compliance

Climate change

Strategic

transformation

Economy and geopolitics

Cyber security

Business continuity

Technology

Product quality

Commercial

People

Legal and compliance

Climate change

Strategic transformation

Principal risks

Read more about how we

manage our principal risks

Page

37

36

Smiths Group plc Annual Report FY2026

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

1. Economy and geopolitics – Impact of economic and geopolitical environment

The economic and geopolitical environment in which

we operate remains unpredictable and subject to

external pressures including regional conflict, trade

disruption, tariffs, inflation and macroeconomic

volatility. These factors may adversely affect demand

for our products and services, increase input costs,

disrupt supply chains and affect profitability.

How this could impact our strategy or business model

–

Continuing geopolitical tensions and regional

instability could adversely affect our operations,

customers and supply chains

–

Tariffs, export controls, sanctions or other trade

barriers could increase costs, restrict market

access and reduce competitiveness

–

A regional or global slowdown could reduce

demand in key markets

–

Inflationary pressure and input cost volatility could

affect margins if not offset through pricing, sourcing

or productivity actions

–

Changes in oil prices, freight markets, interest rates

or construction activity could affect customer

demand and investment decisions in our end

markets including acquisition activity

Examples of how we manage this risk

–

Ongoing monitoring of order flows, pricing,

backlogs and other leading indicators

–

Active management of pricing, sourcing and

productivity to mitigate cost pressure

–

Trade compliance oversight of geopolitical, tariff

and export control developments

–

Scenario planning and management review of

significant external developments

–

Portfolio realignment reduces exposure to volatility

and geopolitical tensions in certain end markets

Examples of how we know the controls are working

effectively

–

Active business reporting on order trends, pricing

and margin at monthly operating reviews

–

Monitoring of inflation, tariff exposure and other

relevant market indicators

–

Regular updates to the Executive Committee and

the Board on major external developments

Developments in FY2026

–

Smiths risk profile is now concentrated in the end

markets served by John Crane and Flex-Tek,

increasing sensitivity to developments in energy,

industrial demand, aerospace and US construction

–

The conflict in the Middle East continues to disrupt

oil and gas infrastructure and airport operations,

limiting site access and increasing operational

uncertainty. Prolonged disruption could slow

customer investment decisions and delay service

and installation activity and new project awards. We

are also assessing indirect impacts, including rising

energy and freight costs, longer shipping routes,

extended lead times, and higher logistics and

insurance charges. We are actively monitoring

developments and evaluating any potential impact

on our forecasts

–

For John Crane, these developments are

particularly relevant given the concentration of

customer activity in energy and process markets

where project timing, service access and customer

investment decisions are sensitive to geopolitical

disruption and oil-price volatility. The exposure, and

therefore risk, for Flex-Tek is significantly less in

these markets

–

As of FY2026, the United States continues to apply

tariffs to most UK goods entering the US market.

Whilst the UK-US Economic Prosperity Deal has

provided relief for certain sectors, including steel,

aluminium and automotive products, many UK

exports remain subject to tariffs that are higher

than those prevailing prior to FY2025

–

The tariff environment between the United States

and China remains subject to ongoing policy

developments. As a result, tariff-related cost

pressures and supply chain uncertainty remain

elevated

CEO review

Read more about the

external environment

in the CEO review

Page

8

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

37

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

2. Cyber security – Impact of enterprise or product cyber event

Cyber threats seeking to compromise the

confidentiality, integrity and availability of IT

systems, operational data and digital assets remain

a continuing and intensifying risk. With increasing

connectivity, advancing AI capabilities and reliance

on third-party systems, any material breach could

cause supply disruption, data loss, regulatory

consequences, litigation and reputational damage.

How this could impact our strategy or business model

–

A cyber attack or third-party compromise could

disrupt operations, engineering, manufacturing,

service delivery or financial processes

–

Loss, corruption or unauthorised disclosure of

sensitive information could result in legal,

regulatory and reputational consequences

–

Inadequate governance of AI could lead to data

leakage, operational disruption and reputational and

financial impacts

–

Weaknesses in product cyber resilience could affect

customer confidence, commercial performance or

compliance obligations

–

Divestment completion activities and changes to

systems, access and data flows may increase

transition-related cyber exposure

Examples of how we manage this risk

–

Board oversight of Smiths cyber strategy and risk

posture

–

In-depth defence controls including AI-based

security systems, supported by formal governance

and monitoring

–

Business-wide assessment and protection of

critical information assets, systems and

applications

–

Annual threat assessments against recognised

external frameworks

–

Information security awareness and mandatory

training

–

Security monitoring, incident response and recovery

linked to business continuity planning

–

Cyber risk analysis embedded in relevant product

lifecycle and engineering processes

–

Oversight of cyber risks associated with critical

third parties

–

Relationships with key government agencies to keep

updated with the evolving threat environment

Examples of how we know the controls are working

effectively

–

Formal reviews with the Executive Committee and

Board

–

Vulnerability scanning, event reporting and

remediation tracking

–

External reviews of threats, processes, controls and

capabilities

–

Completion and follow up of mandatory training

–

Monitoring against recognised standards and

internal requirements

Developments in FY2026

–

Smiths continues to strengthen cyber resilience

following lessons learned from the cyber incident in

FY2025, with ongoing improvement activity focused

on prevention, detection, response and recovery

capabilities

–

The increased frequency of AI-enabled phishing,

ransomware and software supply chain attacks

across the UK market, and the growing focus on

identity attacks and vendor vulnerabilities means

we continued to enhance our cyber resilience

posture and strengthen relevant controls. We are

actively monitoring regulatory and threat

developments and update the Board on any material

operational or financial impacts

–

For John Crane and Flex-Tek, cyber resilience is

increasingly important across manufacturing,

engineering, customer service and field-based

activity. A cyber event affecting these areas could

disrupt operations, delay customer delivery and

reduce service responsiveness

–

Cyber resilience continues to be considered

alongside broader operational resilience activity,

recognising the potential for a cyber event to create

business interruption, supplier disruption and

site-level operational impacts across the

organisation

38

Smiths Group plc Annual Report FY2026

3. Business continuity – Business disruption to supply chain or operations

Disruption to our global supply chains, manufacturing

sites or customer operations due to geopolitical

events, cyber attacks, or climate-related incidents

may negatively impact our financial performance,

customer delivery timelines and operational

resilience.

How this could impact our strategy or business model

–

Inability to deliver products and services to

customers could adversely affect financial

performance and reputation

–

Cost pressure and volatility in commodities, freight

and labour could reduce our ability to serve

customers efficiently

–

Critical supplier or site disruption could affect

production, fulfilment, service delivery or project

execution

–

Business interruption at key locations or within

customer operations could delay revenue and

increase cost

Examples of how we manage this risk

–

Risk assessments and business continuity, crisis

management and disaster recovery plans for

critical locations and operations

–

Evaluation of key sites against a range of risk

factors and actions to increase supply chain

resilience where appropriate

–

Mitigation plans for sole source suppliers,

subcontractors and critical service providers,

including alternative source qualification where

appropriate

–

Property damage and business interruption

insurance

Examples of how we know the controls are working

effectively

–

We test business continuity plans annually

–

Business risk deep-dives including actions taken to

manage/mitigate risk are reviewed by the Audit &

Risk Committee

–

Business interruption risk surveys are completed

annually with an external provider at key operational

sites

–

Insurance is reviewed at least annually by the Audit

& Risk Committee

Developments in FY2026

–

Internal Audit completed business continuity

reviews of both John Crane and Flex-Tek during

FY2026, identifying strengths in local crisis

response processes while also highlighting areas

where business-level alignment, documentation

and consistency can be further strengthened

–

We engaged a third party to lead a refresh of

business continuity plans across Smiths. This work

is intended to strengthen resilience across the

organisation and improve the quality and

consistency of response planning

–

Conflicts in the Middle East and Ukraine continue to

affect global logistics, with elevated shipping costs,

route closures and prolonged lead time volatility

reported across global supply chains. For John

Crane, this risk is particularly relevant given the

importance of field service delivery, customer site

access and the continuity of supply into energy and

industrial end markets

–

For Flex-Tek, continuity risk remains closely linked

to manufacturing site resilience, supplier

dependency, labour availability and logistics

disruption, particularly where volumes, lead times

and customer delivery are sensitive to disruption in

US construction, aerospace and thermal product

lines

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

39

4. Technology – Technology disruption by existing or future competitors

If we fail to maintain our technological differentiation

and our innovation pipeline does not meet customers’

evolving requirements, we may lose market share to

a new or existing competitor. This could impact our

financial performance and our ability to attract and

retain talent.

How this could impact our strategy or business model

–

Erosion of technological differentiation could reduce

competitiveness, pricing power and growth

–

Failure to commercialise innovation effectively could

lead to missed growth opportunities and weaker

returns on investment

–

We may fail to keep pace with customer

expectations in growth areas such as energy

efficiency, thermal management, digital enablement

and performance-led solutions

–

Inadequate protection of intellectual property could

reduce the value of our innovation

Examples of how we manage this risk

–

Portfolio positioning around markets where we

believe we can sustain leadership through

differentiation

–

Continued investment in research, development,

engineering and commercialisation

–

Focus on new product development and innovation

governance

–

Use of customer insight to shape product roadmaps

and technology priorities

–

Robust intellectual property protection and

enforcement where appropriate

Examples of how we know the controls are working

effectively

–

Product commercialisation progress assessed

through operating reviews

–

Technology priorities reviewed as part of strategic

planning

Developments in FY2026

–

For John Crane, the importance of maintaining

technological differentiation in sealing, reliability

and performance-led solutions is increasing,

particularly where customers are seeking greater

efficiency, lower emissions and stronger lifecycle

performance

–

For Flex-Tek, technology risk continues to be shaped

by innovation demands and structural product and

market shifts. This includes the need to respond to

changing customer requirements in thermal

management, aerospace and electrification-related

applications, while continuing to adapt to disruption

in parts of the construction portfolio

–

Competitive pressure is intensifying from traditional

original equipment manufacturers (OEMs) but also

more digitally-enabled competitors with faster

development cycles. Industrial customers are also

placing greater emphasis on sustainability and

lifecycle efficiency

–

Regulatory expectations have continued to evolve.

The EU AI Act is increasing expectations around

transparency, testing, governance and risk

management for AI-enabled products, while the UK

Product Security and Telecommunications

Infrastructure (PSTI) Act continues to require

baseline cybersecurity controls for connectable

products sold in the UK

5. Product quality – Failure of product causes serious harm to people/property

Failure of one of our products, including failure due

to non-compliance with product regulation, may

result in financial loss and reputational damage. In

the ordinary course of business, we could be subject

to material product liability claims and lawsuits,

including potential class actions from customers or

third parties.

How this could impact our strategy or business model

–

Product failure causing material harm to people,

property or customer operations could result in

reputational damage, loss of business and additional

cost

–

Quality, design or manufacturing failures could lead

to warranty exposure, contractual claims or product

liability claims

–

Quality issues in critical applications could affect

customer confidence and future demand

Examples of how we manage this risk

–

Business quality risk assessments and external

audits covering product performance, safety and

compliance

–

Quality assurance processes embedded in

manufacturing locations for critical equipment

–

Quality development and quality integration within

new product development

–

Product cyber risk analysis and mitigation within

relevant lifecycle processes

–

Insurance cover for product liability and related

risks

–

Legal and commercial oversight of contracts, claims

and litigation

Examples of how we know the controls are working

effectively

–

Regular quality reporting and actions to drive

improvement in key metrics

–

Governance frameworks and Delegation of Authority

supporting appropriate control and escalation

–

Close working relationship between legal,

commercial and quality teams

Developments in FY2026

–

For John Crane, quality and product integrity remain

critical given the performance demands of customer

applications, the importance of lifecycle reliability and

the potential impact of any product failure on

customer operations, service delivery and long-term

customer confidence

–

For Flex-Tek, quality risk continues to be shaped by

the need to maintain consistent product performance

and compliance across aerospace, thermal and

construction-related product lines, while also

managing supplier quality, manufacturing discipline

and qualification requirements in key applications

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

CEO review

Read more about innovation

in the CEO review

Page

8

40

Smiths Group plc Annual Report FY2026

6. Commercial – Loss of focus on customers and not competing in the right markets

Failure to adapt our commercial strategies in response

to evolving customer expectations, procurement

models, competitive dynamics and sustainability-

linked requirements may reduce market share, impair

profitability, and hinder access to growth opportunities.

How this could impact our strategy or business model

–

Failure to develop growth markets and geographies

could affect strategic progress and financial

performance

–

Weak alignment between customer need, innovation

and commercial execution could reduce

competitiveness

–

Structural or cyclical shifts in end markets could

affect demand, pricing or long-term growth potential

–

Erosion of market leadership positions could affect

returns and talent attraction

Examples of how we manage this risk

–

Customer and market insight used to inform

strategy, product development and commercial

priorities

–

Regular strategy reviews to evaluate adjacent

market opportunities and competitive developments

–

Commercial excellence activity, including pricing

and market deep dives

–

Focus on long-term customer relationships and

service quality

–

Use of disciplined capital allocation and selective

M&A to support attractive growth areas

Examples of how we know the controls are working

effectively

–

Strategic reviews and business deep-dives

–

Detailed monitoring of pricing, order trends and

customer feedback

–

Regular use of customer input to inform innovation,

marketing and service improvement

Developments in FY2026

–

The commercial risk profile of Smiths is now

concentrated in the end markets served by John Crane

and Flex-Tek, increasing the importance of remaining

closely aligned to customer demand, market selection

and the pace of change across those sectors

–

Investment in low carbon technologies, including

CCUS and hydrogen, continues to accelerate

globally, supporting medium-term opportunities for

John Crane’s rotating equipment and sealing

technologies

–

In the US, housing affordability remains constrained,

which continues to impact Flex-Tek’s HVAC and

flexible duct volumes. New build pricing incentives

have supported activity in parts of the market, but

existing home sales remain sluggish, limiting the

pace of broader residential recovery

–

Commercial aerospace demand has remained

stronger, with delivery pipelines and aftermarket

activity continuing to support demand across

Flex-Tek’s aerospace and fluid management product

lines

–

Smiths continues to monitor both cyclical pressures

and structural market shifts across its key end

markets, with ongoing focus on customer intimacy,

pricing discipline, product-market alignment and

selective investment in attractive adjacencies

7. People – Ability to attract and retain people

Smiths ability to deliver the next phase of its strategy

depends on retaining and developing critical

engineering, operational, commercial and functional

talent across a smaller, focused organisation.

How this could impact our strategy or business model

–

Inability to attract or retain key talent could affect

performance, execution and customer delivery

–

Loss of specialist capability could slow innovation,

weaken operational resilience or reduce commercial

effectiveness

–

Competition for technical, digital and other specialist

roles could increase hiring difficulty and cost

–

Change associated with operating model

simplification and portfolio transition could affect

engagement and retention if not well managed

Examples of how we manage this risk

–

Fair and competitive pay practices

–

Focus on talent development and internal promotions

with targeted interventions in specific markets

–

Ongoing investment in leadership training and

increasing the prevalence of early career

programmes

–

Succession planning and targeted retention activity

for critical roles

–

Internal mobility and capability development initiatives

–

Obtaining employee feedback through employee

surveys

Examples of how we know the controls are working

effectively

–

Formal employee engagement measures and

regular people metrics

–

Review of key talent indicators by the Remuneration

& People Committee

–

Monitoring of attrition, vacancy and time-to-fill data

in critical areas

Developments in FY2026

–

Following the completion of the Smiths Interconnect

and Smiths Detection sales, the people risk profile of

the organisation has become concentrated around

capability retention, leadership continuity and

sustaining engagement through operating model

change

–

As a focused industrial engineering company,

Smiths is increasingly reliant on retaining critical

engineering, operational, commercial and functional

capability across John Crane and Flex-Tek. This is

particularly important where specialist knowledge,

customer relationships and execution capability are

central to performance

–

For John Crane, the retention and development of

technical, commercial and service capability remain

important to supporting customer delivery, innovation

and growth in key energy and process markets

–

For Flex-Tek, several sites continue to experience

structural labour constraints. Specialist roles can

take longer to fill, driving overtime costs,

productivity pressure and extended lead times

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

Markets and megatrends

Read more about culture

and talent

Page

22

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

41

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

8. Legal and compliance – Significant ethical or compliance breach or failing to meet contractual obligations

Individuals may not always behave in accordance with

the company’s Values and legal requirements. We

operate within increasingly complex legal regimes

and often in highly regulated markets. We may also

fail to meet contractual obligations due to delays,

performance issues or breaches by suppliers or

other counterparties.

How this could impact our strategy or business model

–

An ethics or compliance breach could cause harm

to our reputation, financial performance and

customer relationships

–

Failure to comply with trade compliance

requirements could lead to fines, restrictions,

delays or supply disruption

–

Failure to meet contractual obligations could result

in disputes, claims, penalties or loss of revenue

–

Regulatory developments and governance failures

could increase cost, distraction and reputational

damage

Examples of how we manage this risk

–

Proactive ethics and compliance programme,

including Speak Out, investigations and training

–

Anti-bribery, anti-corruption, anti-fraud and other

relevant compliance training

–

Policies, due diligence and approval processes for

key third-party relationships

–

Trade compliance oversight across Smiths

–

Monitoring and responding to legislative and

regulatory developments

–

Embedded legal support in contract negotiations

and the contract lifecycle

Examples of how we know the controls are working

effectively

–

Monitoring and reporting on training, investigations

and compliance metrics

–

Multiple inputs used to assess culture and ethical

behaviour

–

Oversight by the Executive Committee and Audit &

Risk Committee

–

Contract risk tools and legal review supporting

disciplined negotiation and execution

Developments in FY2026

–

The global legal and regulatory environment

remained highly active in FY2026. Expanded

sanctions regimes across the UK, EU and US

continued to require enhanced due diligence,

screening and monitoring across customers,

suppliers, intermediaries and cross border

transactions. Enforcement of export controls and

national security review processes also remained

elevated, increasing scrutiny around international

sales, technology transfers and third-party

relationships. The imposition of new tariffs

particularly in the US required careful navigation

–

As Smiths completed its portfolio reshaping,

changes in legal entity structures, contractual

responsibilities and data flows continued to require

careful management. This included updated legal

responsibilities, contract novation activity and

refreshed data protection and governance

arrangements to support regulatory compliance

and continuity of obligations across the continuing

business

–

For John Crane and Flex-Tek, this remains

particularly relevant given the importance of cross

border sales, complex contract terms, regulated

customer environments and the use of suppliers,

distributors and other third parties in key markets

–

The Economic Crime and Corporate Transparency

Act 2023 continued to increase expectations around

preventing, detecting and responding to economic

crime. The failure to prevent fraud offence, effective

from September 2025, has reinforced the

importance of robust fraud prevention procedures,

clear accountability and evidence of control

operations

–

During the year, we continued to focus on trade

compliance, contract discipline, fraud prevention,

investigations, policy oversight and the effectiveness

of key ethics and compliance processes,

recognising the importance of maintaining strong

legal and compliance foundations as a focused

industrial engineering company

–

We also continued to monitor the evolving legal and

regulatory environment to assess whether further

enhancements to governance, training, due

diligence or control activity were required

Behaving ethically

and legally

Read more about behaving

ethically and legally

Page

28

42

Smiths Group plc Annual Report FY2026

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

9. Climate change – Missed opportunities in energy transition and change in climate conditions causing business disruption

and economic loss

Failure to identify and act on the significant

opportunities arising from the world’s transition

to a low carbon economy and/or failure to respond

appropriately to climate change risks and regulation

could affect our commercial potential, reputation and

resilience.

How this could impact our strategy or business model

–

Failure to serve customers in decarbonisation,

energy efficiency and related growth markets could

reduce commercial potential

–

Failure to progress our climate commitments could

affect reputation and stakeholder confidence

–

Physical climate events could disrupt sites,

suppliers, logistics and customer operations

–

Failure to communicate our approach to climate-

related opportunity and risk could affect investor

interest and broader stakeholder confidence

Examples of how we manage this risk

–

Strategic review of opportunities arising from the

energy transition

–

Net Zero and broader planning across Scope 1, 2

and 3 emissions

–

Performance measures linked to emissions

reduction and energy efficiency

–

Sustainability reporting and internal and external

communication on environmental matters

Examples of how we know the controls are working

effectively

–

Innovation activity that contributes to sustainability

outcomes

–

Independent limited assurance over relevant

climate and sustainability data

–

Monitoring of external ESG benchmarks and

employee feedback

Developments in FY2026

–

Climate-related regulation and disclosure

expectations continued to evolve in FY2026. The

delay to the application timetable for parts of the

CSRD and CSDDD has provided additional

implementation time for some companies, but the

broader reporting and due diligence landscape

remains active and complex across multiple

jurisdictions. In the UK, the FCA also consulted

during FY2026 on moving listed issuers’

sustainability disclosures toward alignment with UK

Sustainability Reporting Standards

–

During FY2026, John Crane announced additional

energy transition wins, including contracts linked to

geothermal, carbon capture, hydrogen and other

lower carbon infrastructure applications,

reinforcing the importance of maintaining strong

positioning in growth areas linked to

decarbonisation and industrial efficiency

–

For Flex-Tek, the climate and sustainability agenda

continues to be reflected both in existing product

development and in portfolio evolution. The

acquisition of DRC Heat Transfer extends Flex-Tek’s

position in industrial cooling technologies and

increases exposure to higher-growth markets

including data centres, supporting our broader

focus on energy efficiency, thermal management

and adjacent sustainability-linked applications

–

Extreme weather events continued, with wildfire

activity, flooding and heat-related disruption across

a number of regions, reinforcing the physical risk

profile associated with climate change

–

Smiths continues to develop its climate-related

reporting, governance and data capabilities, while

also maintaining focus on sustainability-linked

product development, progress against climate

commitments and the integration of climate-related

opportunity and resilience considerations into

strategic planning

Climate change and

Net Zero

Read more about climate

change and Net Zero

Page

31

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

43

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

10. Strategic transformation – Failure to deliver required growth targets post-transformation

Following the completion of our portfolio

restructuring, this risk has shifted to delivering

sustainable growth. This includes achieving organic

growth targets, effectively deploying capital,

scaling commercial and innovation capabilities, and

converting a focused portfolio into improved market

positions, financial performance and shareholder

returns.

How this could impact our strategy or business model

–

Failure to achieve organic and inorganic growth

targets could result in underperformance against

market expectations and shareholder returns

–

Insufficient revenue growth could limit margin

expansion and constrain reinvestment capacity

–

Ineffective deployment of capital (including M&A

and organic investment) could reduce returns and

delay strategic progress

–

Over-reliance on a narrower portfolio or end

markets could increase sensitivity to market activity

and external shocks

–

Failure to scale innovation or product development

could limit future growth opportunities

–

Misalignment between strategy, operating model

and growth execution could reduce speed, focus

and effectiveness of delivery

Examples of how we manage this risk

–

Clear articulation of growth strategy, priorities and

performance targets

–

Executive oversight and governance of growth

delivery, including regular performance reviews and

challenge

–

Disciplined M&A framework including dedicated

teams and governance activities to review, close and

integrate targets post acquisition

–

Investment in innovation, product development and

technology to support sustainable growth

–

Active portfolio management to focus resources on

higher-growth, higher-return opportunities

–

Monitoring of external market conditions,

competitor activity and macroeconomic risks

impacting growth assumptions

Examples of how we know the controls are working

effectively

–

Organic growth, profitability and cash generation

are performing in line with targets.

–

Strategic growth initiatives and investment

programmes are achieving agreed milestones and

target outcomes.

–

Innovation and product development activities are

generating new revenue opportunities and

supporting market competitiveness.

–

Management identify and respond to changes in

market conditions in a timely manner, supported by

regular performance and forecasting reviews

Developments in FY2026

–

Smiths risk profile is now concentrated on John

Crane and Flex-Tek requiring more focus on growth

strategies, capabilities and roadmaps for those

businesses. This has led to a refreshed growth

strategy under four headings: Accelerate, Innovate,

Execute and Compound to maximise growth

opportunities available to those businesses

CEO review

Read more about our

strategy in the CEO review

Page

8

44

Smiths Group plc Annual Report FY2026

NON-FINANCIAL AND SUSTAINABILITY

INFORMATION STATEMENT

Reporting requirement

Relevant policy or document

More information and related principal risk

Environmental

matters

Environmental Sustainability Policy

– our commitment to minimising the

environmental impact of our business activities, products and services worldwide

Waste Policy

– the principles we have adopted to address our most significant waste

impacts and issues

Water Policy

– the principles we have adopted to address our most significant water

impacts and issues

ESG Supply Chain Due Diligence Policy

– the due diligence processes we have

adopted for supplier selection and monitoring to ensure ESG compliance

Key performance indicators

Climate change and Net Zero

Natural resources and biodiversity

Managing our risks and Principal risks and uncertainties

Principal risk: Climate change

Task Force on Climate-related Financial Disclosures

Page 19

Page 31

Page 32

Page 33

Page 43

Page 47

Climate-related

financial

disclosures

Environmental Sustainability Policy

– our commitment to minimising the

environmental impact of our business activities, products and services worldwide

Waste Policy

– the principles we have adopted to address our most significant waste

impacts and issues

Water Policy

– the principles we have adopted to address our most significant water

impacts and issues

ESG Supply Chain Due Diligence Policy

– the due diligence processes we have

adopted for supplier selection and monitoring to ensure ESG compliance

Key performance indicators

Climate change and Net Zero

Natural resources and biodiversity

Principal risk: Climate change

Task Force on Climate-related Financial Disclosures

Page 19

Page 31

Page 32

Page 43

Page 47

Employees

Code of Business Ethics

– outlines the ethical standards we all commit to

Human Rights Policy

– recognises the important responsibility we have with respect

to human rights

Fair Employment Policy

– designed to make Smiths a fair, inclusive and respectful

place to work

Recruitment Policy

– designed to attract, engage, develop and retain talented people

who share our values and sense of purpose

Health, Safety and Wellbeing Policy

– describes our commitment to achieving

excellence in the health, safety and well-being of colleagues

Building our culture

Safety

Talent

Behaving ethically and legally

Managing our risks and Principal risks and uncertainties

Principal risk: People

Section 172 Statement and stakeholder engagement

Remuneration & People Committee report

Page 22

Page 24

Page 26

Page 28

Page 33

Page 41

Page 63

Page 77

Social matters

Code of Business Ethics

– outlines the ethical standards we all commit to

Data Protection Code of Conduct

– sets out the standard for collecting and handling

personal data about individuals

Supplier Code

– our commitment to doing business safely, sustainably, lawfully and to

the highest business and ethical standards

Modern Slavery Statement

– steps taken by Smiths to address the risk of modern

slavery and human trafficking in its business and supply chains

Building our culture

Behaving ethically and legally

Principal risk: Legal and compliance

Section 172 Statement and stakeholder engagement

Page 22

Page 28

Page 42

Page 63

Key performance

indicators

See our KPIs

Page

19

Principal risks and

uncertainties

Read more about our

principal risks

Page

35

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

45

NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT

CONTINUED

Reporting requirement

Relevant policy or document

More information and related principal risk

Respect for

human rights

Code of Business Ethics

– outlines the ethical standards we all commit to

Modern Slavery Statement

– steps taken by Smiths to address the risk of modern

slavery and human trafficking in its business and supply chains

Human Rights Policy

– recognises the important responsibility we have with respect

to human rights

Speak Out Policy

– outlines the circumstances in which an employee should Speak

Out to report suspected wrongdoing and the appropriate channels to do so

Responsible Minerals Sourcing Policy

– addresses our commitment to the sourcing

of minerals in an ethical and sustainable manner that safeguards human rights

Behaving ethically and legally

Managing our risks and Principal risks and uncertainties

Principal risk: Legal and compliance

Page 28

Page 33

Page 42

Anti-bribery and

anti-corruption

matters

Code of Business Ethics

– outlines the ethical standards we all commit to

Anti-Corruption Policy

– sets out Smiths approach and controls to manage bribery

and corruption risks

Speak Out Policy

– outlines the circumstances in which an employee should Speak

Out to report suspected wrongdoing and the appropriate channels to do so

Behaving ethically and legally

Managing our risks and Principal risks and uncertainties

Principal risk: Legal and compliance

Audit & Risk Committee report

Page 28

Page 33

Page 42

Page 69

Business model

CEO review

Key performance indicators

Principal risk: Commercial

Page 5

Page 8

Page 19

Page 41

United Nations

Sustainable

Development

Goals

Business has a vital role to play in delivering the UN SDGs. Our business activities, the

way we operate, and our ESG framework and priorities enable us to contribute in a

meaningful and practical way to seven of these critical global goals.

Behaving ethically

and legally

Page

28

Policy due diligence and outcomes

Smiths is committed to fostering a culture of integrity

and accountability. Our confidential Speak Out reporting

hotline is central to this commitment, providing

employees and stakeholders with a channel to raise

concerns about potential breaches of our values,

policies or the law. The hotline supports the

assessment of policy effectiveness and helps ensure

that our standards are upheld across Smiths.

The Internal Audit function supports this by conducting

regular audits to assess adherence to key policies and

procedures. In FY2026, audits included IT third party

management, responsible sourcing and digital

development governance, providing insight into policy

application and control effectiveness in practice. In

parallel, our Ethics & Compliance team issues targeted

surveys to selected sites and functions each year.

These surveys include questions on ethics awareness,

Speak Out reporting, data protection, supplier diligence

and other compliance topics, and are used to assess

compliance with our Human Rights Policy and broader

ethical standards.

Supporting information

More information on the company’s principal risks and

how they are managed can be found on pages 35 to 44.

Our key performance indicators, including both

financial and non-financial metrics, can be found on

pages 19 to 20. The S172 Statement is on pages 63 to 64

in the Governance report.

46

Smiths Group plc Annual Report FY2026

TASK FORCE ON CLIMATE-RELATED

FINANCIAL DISCLOSURES

FCA Listing Rules

In this report, we set out our climate-related

financial disclosures consistent with all of

the Task Force on Climate-related Financial

Disclosures (TCFD) recommendations and

recommended disclosures pursuant to

Listing Rule 6.6.6(R)8(a)(b). This includes

all four of the TCFD pillars and the 11

recommended disclosures set out in the

report entitled ‘Implementing the

Recommendations of the Task Force on

Climate-related Financial Disclosures’

published in October 2021 by the TCFD. In

completing this work, we made use of TCFD

guidance material including the TCFD

technical supplement on the use of scenario

analysis, TCFD Guidance on Metrics, Targets

and Transition Plans, and the TCFD Guidance

for All Sectors. We are reporting against

the TCFD framework in line with FCA

Listing Rules.

Compliance statement

Governance

Board

The Board has overall responsibility for our approach to

sustainability matters, including climate change, and

retains oversight of sustainability across the Group. The

Audit & Risk Committee supports the Board through

delegated responsibility for sustainability performance,

climate-related risks and reporting. The Board receives

an annual update on the Group’s sustainability strategy

and progress against its sustainability commitments.

Sustainability matters, including climate-related

opportunities, are also considered through business

deep-dives at Board and Audit & Risk Committee

meetings, as appropriate. Further information on our

governance framework can be found in the Governance

report on page 56.

Our Board has a collective competency for

sustainability matters, including climate change.

Individual Directors have sustainability experience

gained from current and previous positions held at

other companies. Further detail can be found in the

Board biographies on pages 57 and 58 and the Board

governance framework on page 56.

Executive Committee

Business Presidents form part of the Executive

Committee and are responsible for their businesses’

approach to sustainability, including climate change.

The Executive Committee reports to the CEO, who

reports directly to the Board six times a year.

Discussions at the Executive Committee relate to

sustainability strategy and climate-related commercial

opportunities arising from energy transition,

electrification, resource efficiency and other structural

market trends. It also monitors operational

performance, including energy efficiency, GHG

emissions reductions and progress against

sustainability commitments. Smiths overall approach,

targets and sustainability reporting are overseen by the

Chief People, Sustainability & Excellence Officer.

Climate-related risks are managed and reported in line

with wider enterprise risk management (ERM)

processes, with the outcomes of business assessments

integrated into executive-level strategic planning and

priorities. Climate-related opportunities, including

those arising from decarbonisation and the energy

transition, are considered by the Executive Committee

and Board and inform Smiths strategic response to

evolving market opportunities.

A number of key climate-related matters were

discussed by the Executive Committee and Board in

FY2026, including progress against science-based

targets (SBTs), the agreement of new environmental

targets and developments in climate-related market

opportunities.

Executive remuneration

Scope 1 & 2 emissions reduction targets aligned to our

SBTs continue to form part of our incentive

arrangements. Climate-related metrics were first

introduced in FY2023, with an energy reduction

measure included in the Annual Incentive Plan (AIP)

and a GHG emissions reduction measure included in

the Long-Term Incentive Plan (LTIP), strengthening

accountability for the delivery of our climate goals.

These measures continued in FY2026, with an energy

reduction metric included in the AIP and GHG reduction

targets remaining in outstanding LTIP awards.

An energy reduction metric will continue to form part

of the FY2027 AIP. Further details can be found in the

Remuneration & People Committee Report on pages

77 to 89.

Board governance

framework

Page

56

Enterprise risk

management framework

Page

34

Remuneration & People

Committee report

Page

77

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

47

TCFD

CONTINUED

technologies and fleet electrification) and alternative

fuels. The majority of our Scope 3 emissions will be

addressed by in-country grid decarbonisation and via

targeting significant suppliers with education and

training to set and meet their own SBTs. More

information can be found on page 31.

As noted above, opportunities identified within the

climate scenario analysis are incorporated into

business planning.

Risk management

We have a business-wide approach to risk

management which is discussed in detail on pages 33

to 44. Details of how we manage our aggregate Climate

change risk can be found on page 43.

Our discrete climate risk assessment work considers a

wide range of risks relating to climate change, identified

with the support of external technical specialists and

then evaluated through business workshops. See

climate risks and opportunities on pages 49 to 50. Risks

include impacts relating to damage to assets from

weather events, cost and availability of resources,

regulation related to GHG emissions, and increased

demand for technologies that support resource

efficiency and decarbonisation. The identification

process includes assessment of the full value chain,

including impacts relating to key supply chain assets

from extreme weather events.

The potential financial impacts of the climate risks and

opportunities identified are categorised into:

Low:

£25-50m effect on revenue

Moderate:

£50-100m effect on revenue

High:

£100-250m effect on revenue

Financial impacts are being reviewed as part of the

planning for climate-related disclosures in FY2027.

Climate scenarios

In line with best practice, our analysis uses three

different climate warming scenarios and three

transition scenarios, both including a low-carbon

pathway aligned to 1.5°C warming. We use these

climate scenarios to inform management and relevant

stakeholders within the businesses about climate risks.

Climate risk data from our insurers has also been

integrated into the assessment of physical climate risk

to our sites. This data quantifies financial exposure to

climate risk by risk type, modelled in line with our three

climate scenarios.

Impact on the business, strategy and financial

planning

Our Net Zero transition plan and GHG emission

reduction targets for Scopes 1, 2 and 3 were approved

by the Science-Based Target initiative (SBTi) in

December 2023. These outline our operational Net Zero

GHG trajectory to meet a 1.5°C scenario by achieving

Net Zero Scope 1 & 2 emissions by 2040 and Net Zero

Scope 3 emissions by 2050. These targets align with the

Net Zero by 2050 targets set out by the UK and US

governments (the UK and US being our largest areas of

operation). Our transition plan was developed with

consideration of the updated TCFD guidance and lays

out our 2028, 2032 and long-term Net Zero milestones.

The approach is aligned with the Science-Based

Targets initiative (SBTi) Net-Zero Standard and

considers carbon offsetting only as a last resort for

unavoidable residual Scope 3 emissions. Following

completion of the sales of Smiths Interconnect and

Smiths Detection, we are undertaking a review of our

SBT trajectory and will resubmit it to the SBTi for

validation. New net zero trajectories aligned to the

residual business will be published in FY2027.

Business-level initiatives and actions to reduce Scope 1

& 2 emissions are based on energy efficiency, green

electricity (including implementation of solar

Strategy

Climate risks and opportunities

We have identified a range of physical and transition

risks and opportunities that could impact our business

over the short (2026-2031), medium (2032-2037) and

long term (2037 onwards).

While we recognise that climate-related risks will occur

over short-, medium- and long-term horizons, our

assessment determined that climate-related risks and

opportunities are likely to impact the business in the

medium and long term only and we believe that we

remain resilient to short-term climate risks with the

adaptation and mitigation strategies currently in place.

We have also determined that none of the climate risks

identified represent a material financial risk to the

business in the time periods considered, although

identified as a principal risk for Smiths in aggregation.

Strategic decisions relating to climate risks and

opportunities

As the world transitions to a low-carbon economy,

Smiths has identified climate-related opportunities

arising from global investment in decarbonisation,

electrification, resource efficiency and other structural

market trends. Commercialising these technologies is a

priority and is built into our businesses’ strategic plans.

The Board considers sustainability and climate-related

matters as part of its oversight of Group strategy and

performance. This includes reviewing the Group’s

sustainability strategy, progress against sustainability

commitments and the transition of our operations

towards net zero. Climate-related opportunities are

considered through business deep-dives and strategy

discussions, as appropriate, while the Board receives

an annual update on sustainability strategy.

Pages 69 to 75 and 55 to 65 detail the work of the Audit

& Risk Committee and the Board.

Markets and megatrends

Page

4

Audit & Risk

Committee report

Page

69

Read more about our

chosen climate scenarios

on page 47 of our FY2025

Annual Report

48

Smiths Group plc Annual Report FY2026

TCFD

CONTINUED

A summary of our risk and opportunities assessment across each scenario can be found below.

Potential financial impact

SSP1 – 2.6

Net Zero

SSP2 – 4.5

Current trajectory

SSP5 – 8.5

Breach of planetary boundaries

Risk and risk description

Response/actions we’re taking and how they are managed

2030

2050

2030

2050

2030

2050

Physical risks

Environment (acute physical)

Increased risk of property damage and business interruption from

climate-related natural hazards at our operational sites, e.g.

raised severity of storm activity.

Here, the financial risk relates to

increased costs and resulting revenue losses due to business

disruption, repair and increased insurance costs.

All sites are required by policy to complete annual site-specific risk

assessments through their business continuity plan review, which

considers risks from a wide range of issues, including from severe

weather. Sites have been identified as vulnerable, so mitigation

measures are being put in place such as relocations; alert systems;

guidance from insurance providers when sites come up for

insurance policy renewal; and local, specific mitigation measures

such as independent generators.

Low

Moderate

Low

Moderate

High

Environment (acute physical)

Health and safety risks

due to overheating from heatwaves and

water supply issues due to regional water scarcity. This could lead to

a loss of revenue due to operations having to be temporarily shut, as

well as additional costs from heating and cooling.

A number of our facilities have been identified as vulnerable. There

are health and safety risks associated with the increased frequency

and severity of heatwaves, droughts and higher temperatures.

Where necessary, cooling systems are being rolled out to mitigate

risk.

Low

Moderate

Low

Moderate

Low

Moderate

Environment (acute physical)

Weather events directly impacting transportation networks

and

global value chains. This could lead to a loss of revenue due to delays

in getting products to market.

We have a localisation strategy in place to minimise travel distances

by ensuring products are produced as close to customers as

possible. Our supply chain strategy also looks to reduce reliance on

single-source materials to increase resilience to regional disruption.

Low

Moderate

Low

Moderate

Low

Moderate

Potential financial impact

SSP1 – 2.6

Net Zero

SSP2 – 4.5

Current trajectory

SSP5 – 8.5

Breach of planetary boundaries

Opportunity and opportunity description

Response/actions we’re taking and how they are managed

2030

2050

2030

2050

2030

2050

Physical opportunities

Environment (chronic physical)

Increased demand for Flex-Tek’s cooling systems.

Ongoing extreme

variation in global temperatures will increase demand for heating,

ventilation and air conditioning (HVAC) systems from Flex-Tek

globally.

Responding to increased revenue from demand for residential and

commercial cooling systems driven by ongoing variation in global

temperatures.

Low

Moderate

Environment (chronic physical)

New customers/markets for John Crane due to increased

frequency and severity of dry spells/drought.

John Crane has also

identified an opportunity to develop sealing and water filtration

technology for the transportation and cleaning of water in water-

stressed locations.

We are reviewing and investigating ways to minimise travel

distances by ensuring products are produced as close to customers

as possible.

Low

Moderate

Low

Moderate

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

49

TCFD

CONTINUED

Potential financial impact

IEA WEO NZE

High ambition Net Zero

IEA WEO APS

Medium ambition announced

pledges

IEA WEO STEPS

Low ambition stated policies

Risk and risk description

Response/actions we’re taking and how they are managed

2030

2050

2030

2050

2030

2050

Transition risks

Political and legal risk

Regulations relating to sustainability and GHG emissions

would

lead to increased costs for compliance and reporting, as well as costs

associated with emissions reductions and monitoring.

We have an established Sustainability Group and other cross-

functional working groups to monitor current and emerging

regulations.

Moderate

Low

Moderate

Low

Moderate

Market risk

New and emerging competitors.

Reduced accessible markets due to

increased competition in the Net Zero/energy efficiency space such

as methane leakage. Increased competition could lead to reduced

revenue.

John Crane has implemented procedures to track and respond to

changes in demand from traditional oil & gas customers and target

its portfolio of products and services to new customers and

markets, e.g., hydrogen and carbon capture.

High

Low

High

Low

Moderate

Low

Market risk

Increased transportation costs

due to greater fuel costs relating to

freight and internal transportation.

Reduction in double handling of products, optimising space in freight

through reusable and recyclable packaging solutions and exploring

localised business models.

Moderate

Low

Moderate

Low

Moderate

Market risk

Increased cost and reduced availability of critical raw materials

leading to price volatility and production constraints.

Actions are taken based on trends such as pre-buys or vendor

managed inventory. Businesses also periodically look at alternative

materials.

Moderate

Low

Moderate

Low

Moderate

Potential financial impact

IEA WEO NZE

High ambition Net Zero

IEA WEO APS

Medium ambition announced

pledges

IEA WEO STEPS

Low ambition stated policies

Opportunity and opportunity description

Response/actions we’re taking and how they are managed

2030

2050

2030

2050

2030

2050

Transition opportunities

Products and services

Growth in products market for John Crane from increased demand

for energy efficiency and emission reduction products

with

increased revenue from sealing solutions that reduce hydrocarbon

leakage.

Continuing development of next generation solutions for oil & gas

and other industrial customers that align with their decarbonisation

targets, such as via digitisation. Demand for energy efficient

products and support for hydrogen and carbon capture projects has

sustained due to increasing customer interest in energy security.

Moderate

High

Moderate

Low

Products and services

Demand for new products and services in the building and heating

sectors for Flex-Tek

anticipating changes in low emission technology

and the potential outlawing of natural gas.

Flex-Tek has new products and services being developed that

support the energy transition, e.g. electrical heating systems that

replace gas as process heat in green steel production and tubing

solutions for heat pump applications.

Low

Moderate

High

50

Smiths Group plc Annual Report FY2026

Metrics and Targets

We have identified relevant metrics and targets to

monitor progress in achieving our sustainability goals

and to manage and mitigate identified climate-related

risks and opportunities. These include: energy use,

GHG emissions, % renewable electricity, reductions in

water and waste, and water, packaging and biodiversity

projects. These metrics and targets are monitored by

the Board and inform decision making as we execute

our strategic priorities. See pages 52 and 31 for our

metrics and targets and a discussion of performance in

FY2026. See page 52 for our SECR global energy use

and emissions disclosure. See page 47 for how our

metrics are linked to our remuneration arrangements.

There were no changes to the methodologies applied in

the calculation of emissions, carbon, or other

environmental data during FY2026. To support

like-for-like year-on-year comparisons against metrics

and targets, emissions data has been adjusted to

reflect changes in the Group’s organisational boundary

arising from acquisitions and divestments, with

acquired and divested operations excluded from both

the current and comparative reporting periods where

applicable.

Energy and GHG emissions

GHG inventory

The company assesses the GHG emissions associated

with all its global operations as well as the central

function. We have developed a GHG Inventory

Management Plan (IMP) that outlines our methodology

to provide systematic and appropriate GHG inventory

data collection, manipulation and management, to

produce a relevant, credible and transparent GHG

inventory that will provide visibility into our near- and

long-term goals. The IMP includes methods to estimate

direct emissions from Smiths operations (Scope 1),

indirect emissions from purchased energy (Scope 2),

and value chain emissions (Scope 3). The methods

prescribed in the IMP conform to the World Resources

Institute (WRI) and World Business Council for

Sustainable Development (WBCSD) GHG Protocol and

the United States Environmental Protection Agency

(USEPA) Center for Corporate Climate Leadership

Greenhouse Gas Inventory Guidance.

GHG boundaries

Per the GHG protocol, we have selected the operational

control approach to set the organisational boundary for

our GHG inventory, meaning 100% of GHG emissions

from assets which the Company manages and over

which it has authority to implement operational policies

will be included. In selecting these organisational

boundaries, we evaluated equity share, financial control

and operational control approaches and primarily

considered the comprehensiveness of assets that

would be included in the inventory under each of the

three approaches, as well as which boundary would

best reflect the company’s level of influence over

emissions.

As for our operational boundary, which determines the

direct (Scope 1) and indirect (Scope 2 and 3) emissions

associated with operations within our organisational

boundary, we defined this as operations where we have

the full authority to introduce and implement operating

policies. Operations or activities that are outside of our

operational control and therefore excluded from our

Scope 1 and Scope 2 inventories, may become relevant

when accounting for Scope 3 emissions.

GHG emissions are reported in metric tonnes of CO

2

equivalents (MT CO

2

e). Because individual GHGs

have different impacts on climate change, or global

warming potentials (GWPs), CO

2

e is used to express

the impact of emissions from each GHG on a common

scale. Smiths uses the IPCC Sixth Assessment Report

(AR6) GWPs.

Inventory boundary

Smiths will report all GHG emissions within its

organisational and inventory boundary. Emissions are

considered outside of the inventory boundary when they

are quantified as not material.

Long-term targets:

–

Net Zero emissions from our operations

(Scope 1 & 2) by 2040 (SBTi)

–

Net Zero emissions from our supply chain and

products in use (Scope 3) by 2050 (SBTi)

TCFD

CONTINUED

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

51

Performance and short-term targets

FY2026

FY2025

Change

Target

Target Achieved

Energy use (MWh)

171,831¹

181,242

−5%

2% reduction in absolute MWh FY2026 vs FY2025

Renewable electricity

75%

80% by FY2027

Scope 1 & 2 emissions (market-based) (tCO

2

e)

25,121

26,663

−6%

SBTi trajectory

Scope 3 emissions (tCO

2

e)

600,371

580,953

3%

SBTi trajectory

Supplier engagement

35%

28%

40% of supplier spend evaluated on EcoVadis by FY2027

Supplier engagement Scope 3

9%

25% of supplier spend committed to SBTi targets by FY2027

1

FY2026 energy use adjusted to include Flex-Tek divestments’ energy consumption, exclude the DRC acquisition and remove dual running impact associated with Acceleration plan site closures.

SECR global energy use and emissions disclosure

Reported numbers for the Group.

FY2026 Total

FY2026

Continuing

operations

FY2026

Discontinued

operations

FY2025 Total

FY2025

Continuing

operations

1

FY2025

Discontinued

operations

1

FY2024 Total

Change FY2026

vs FY2025

Continuing

operations

Global energy use – absolute values

MWh

Δ 207,316

162,305

45,011

213,519

157,555

55,964

218,344

3.01%

UK energy use – absolute values

MWh

8,969

3,614

5,355

9,385

3,678

5,707

9,661

Global emissions – absolute values

Scope 1 (direct emissions)

t CO

2

e

Δ 17,561

15,037

2,524

17,422

14,541

2,881

18,758

Scope 2 (market-based emissions)

t CO

2

e

Δ 15,840

10,084

5,756

20,286

12,122

8,164

23,820

Scope 2 (location-based emissions)

t CO

2

e

42,553

30,961

11,592

46,732

32,361

14,371

47,150

Scope 3 (value chain emissions)

t CO

2

e

Δ 1,073,894

600,371

473,523

1,188,057

580,953

607,104

1,151,467

Total Scope 1 & 2 emissions (market-based)

t CO

2

e

Δ 33,401

25,121

8,280

37,708

26,663

11,045

42,578

(5.79)%

Total Scope 1 & 2 emissions (location-based)

t CO

2

e

60,114

45,999

14,115

64,154

46,890

17,264

65,908

UK Scope 1 & 2 emissions (market-based)

t CO

2

e

1,029

179

850

1,228

257

971

1,341

Global emissions – normalised values

Scope 1 (direct emissions)

t CO

2

e/£m revenue

5.6

7.8

2.1

5.2

7.7

2.0

6.0

Scope 2 (indirect emissions)

t CO

2

e/£m revenue

5.0

5.2

4.7

6.1

6.4

5.7

7.6

Scope 3 (value chain emissions)

t CO

2

e/£m revenue

340.2

309.9

388.1

356.1

306.1

422.2

367.6

Total Scope 1 & 2 emissions

t CO

2

e/£m revenue

10.6

13.0

6.8

11.3

14.0

7.7

13.6

(7.64)%

1

Results for the year ended 31 July 2025 have been represented to reflect the reclassification of the Smiths Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Limited assurance

KPMG has provided limited assurance under ISAE (UK) 3000 and 3410 over selected information marked with ∆. See www.smiths.com for full assurance reports.

TCFD

CONTINUED

52

Smiths Group plc Annual Report FY2026

GOING CONCERN

AND VIABILITY

STATEMENT

At 31 July 2026 the Group had one Revolving Credit

Facility (RCF) from these banks. A US$800m RCF

which matures in May 2030. This RCF has no financial

covenants attached and was undrawn at 31 July 2026.

The Directors, having made appropriate enquiries, have

a reasonable expectation that the Company and the

Group have adequate resources to continue in

operation for a period of at least 12 months from the

date of this Report, and that there are no material

uncertainties that could impact the ability to do so.

Thus, they continue to adopt the going concern basis of

accounting in preparing the financial statements of the

Company and the Group.

In accordance with the requirements of the 2024 UK

Corporate Governance Code, the Directors have

assessed the longer-term prospects of the Group,

taking into account its current position and a range of

internal and external factors, including the principal

risks detailed on pages 35 to 44 (the viability

assessment).

The Directors have determined that a three-year period

to 31 July 2029 is an appropriate timeframe for the

viability assessment. The selected period is considered

to be appropriate as, based on the historical

performance of the Group, a three-year outlook

represents an optimum balance of long-term

projection and acceptable forecasting accuracy. The

three-year viability assessment timeframe also takes

into account considerations such as the maturity of the

Group’s borrowing facilities and the cyclicality of the

performance of the Group’s underlying markets. In

making this viability assessment, the Directors have

considered the current financial position and prospects

of the Group, including the current year business

performance, the detailed operating plan for 2027 and

forecasts based on the Group’s strategic plan for 2028

and 2029. Against these financial projections, the

Directors took into account the principal risks (as

outlined on pages 35 to 44) to develop a set of plausible

scenarios (as set out overleaf) with potentially high-

impact outcomes.

The Group’s business activities, together with the

factors likely to affect its future development,

performance and position, are set out in the Strategic

Report on pages 2 to 54. The financial position of the

Company, its cashflows, liquidity position and

borrowing facilities are described on pages 12 to 14. In

addition, the notes to the financial statements include

the Company’s objectives, policies and processes for

managing its capital; its financial risk management

objectives; details of its financial instruments and

hedging activities; and its exposures to credit risk and

liquidity risk.

The Group has undertaken a detailed going concern

review, as set out below, with a severe but plausible

downside scenario modelled to assess the impact on

the Group of a significant adverse global economic

shock from political unrest or resurgence of a

pandemic which leads to significant supply chain

disruption, low customer demand and recessionary

circumstances spanning several years.

At 31 July 2026, following the completion of the

disposals of the Interconnect and Detection businesses,

the Group held £1,747m of net cash. In the prior year, at

31 July 2025, the Group (including businesses held for

sale) had £441m of net debt. At the end of July 2026, the

Group had available cash and short-term deposits of

£2,956m. These liquid resources are immediately

available with 99% invested with the Group’s global

banking partners. The Group’s debt profile shows an

average maturity of 3.9 years (from 1.6 years at 31 July

2025). The Group’s €650m 2.00% Eurobond 2027 is due

to be repaid in February 2027, a new €650m Eurobond

was issued in November 2025 which is not due for

repayment until FY2034.

–

Foreign exchange rates for £ at US$1.35 and €1.17

are modelled to remain at this level in the forecast

period;

–

Interest payments have been updated to reflect

latest forecast interest rate increases, offset by

interest received from increased cash. The viability

model assumes no further refinancing with, if

necessary, the Group’s RCF drawn to maintain our

minimum cash requirements;

–

Dividend payments are projected to grow over the

viability assessment period. Even under the various

individual downside scenarios it has been assumed

that dividend increases are maintained, with lower

growth or cuts representing potential mitigation

actions;

–

The €650m Eurobond due for repayment in FY2027

was refinanced in FY2026 and is assumed to be

repaid by cash on hand; and

–

The previously announced £1.5bn share programme

to return the Smiths Detection cash proceeds to

shareholders commenced on completion of the

£1bn buyback programme to return the Smiths

Interconnect proceeds. The share buyback

programmes are expected to run through calendar

year 2027 in all scenarios, with a deferral being

possible mitigation.

Consideration was then given to the magnitude of the

gross risks and their potential impact, directly or

indirectly, on the Group’s future performance and

liquidity. The assessment included stress testing of the

Group’s financial capacity to absorb the impact of such

adverse events, either individually or in combination,

and what mitigating actions the Group could take to

respond to them in order to protect its business.

The Directors have also considered the Group’s ability

to raise additional liquidity. In performing this

assessment, the Directors have taken comfort from the

diversity of the Group’s businesses across different

markets, industries, geographies, products and

customers. In order to ensure consistency, the base

case used for the three-year viability assessment has

also been reconciled against business impairment

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

53

Based on the robust assessment of the Group’s

emerging and principal risks, including those that could

threaten its business model, future performance,

solvency or liquidity, the Directors confirm that, given

the current strong cash position, under all scenarios

they have a reasonable expectation the Group will

review models. The base case viability model includes

the cashflow outflows of the share buyback

programmes to return the majority of the cash

proceeds of the Smiths Interconnect and Smiths

Detection disposals, are modelled in the risk scenarios

unless otherwise stated.

remain viable for the period being assessed and will

continue to operate and meet its liabilities as they fall

due. The Directors have no reason to doubt that the

Group will continue in business beyond the period

under assessment.

Scenarios modelled

Scenarios

Link to principal risks

Scenario-specific assumptions

Scenario 1

A significant economic shock (political unrest or resurgence of a pandemic)

leads to significant supply chain disruption, low customer demand and

recessionary circumstances spanning several years and well in excess of

the impact felt in FY2020/21.

Business continuity

and Economy and

geopolitics

–

20% fall in revenue across the Group in all three years

–

55% reduction in operating profit in FY2027 due to plant closures, customer and

supply chain disruption, a 54% fall in FY2028 and 53% in FY2029

–

Increased working capital due to stock builds and customer defaults

–

No mitigating activities such as restructuring and headcount reductions

–

Return of proceeds from strategic divestments continues as planned

Scenario 2

A cyber security incident impacts company-wide systems resulting in

operational shutdowns and leak of confidential employee, customer and

supplier data along with contractual breaches for late deliveries.

Cyber security

–

15% reduction in revenue in all years

–

Breach of contract legal defence costs of £20m per year

–

Increase in capex in FY2027 of £25m to strengthen security systems

–

One-off payment of £100m payable in FY2027 in settlement of the data leak claim

–

No mitigating activities such as restructuring and headcount reductions

–

Return of proceeds from strategic divestments continues as planned

Scenario 3

The current Middle East conflict continues preventing Smiths from

operating in the region and impacting global trade routes.

Economy and

geopolitics

–

Loss of all future revenue from Middle East region

–

Additional costs of £10m per annum from increased freight costs

–

Return of proceeds from strategic divestments continues as planned

Scenario 4

Federal reserve policy causes US mortgage rates to remain high. Elevated

financing costs and affordability constraints reduce residential demand

and impact builder confidence resulting in the US housing market not

recovering during this period.

Economy and

geopolitics

–

No revenue growth in Flex Tek’s Construction or Thermal business units in any year

–

No mitigating activities such as restructuring and headcount reductions

Scenario 5

One of John Crane’s mechanical seals is identified as faulty and the cause

of an explosion at a major refinery causing the deaths of two staff and

significant damage to the plant. John Crane is sued for the costs of repair

and restoration of the plant in addition to the consequential losses of plant

closure.

Product quality

–

Legal defence costs of £20m per annum plus a one-off payment of £100m in FY2027 in

settlement of the deceased’s claims

–

Legal defence costs of £5m per annum over the review period in relation to agreement

of restoration costs

–

Restoration costs of £50m spread over the three-year review period

–

Legal defence costs of £25m per annum over the review period in relation to

mitigation of consequential loss claims

–

Insurance claim rejected, one-off payment of £250m payable in FY2027 in settlement

of the losses claim

The Strategic report was approved by the Board on 21 September 2026.

By order of the Board

Roland Carter

Chief Executive

GOING CONCERN AND VIABILITY STATEMENT

CONTINUED

54

Smiths Group plc Annual Report FY2026

Chairman’s introduction

I am pleased to introduce our

Governance Report, which

explains our governance

framework and how the Board

discharged its responsibilities

during the year.

FY2026 was a year of significant

transformation for Smiths. Following the

announcement in January 2025 of plans to

divest Smiths Interconnect and separate

Smiths Detection, the Board oversaw the

successful completion of both transactions.

This repositioned Smiths as a focused,

premium industrial engineering company,

delivering on the strategic actions

announced in January 2025 to unlock value

and enhance returns to shareholders. The

Board also approved the next phase of

Smiths strategy, oversaw the allocation of

disposal proceeds and, following

consultation with shareholders, supported

enhanced returns through the share

buyback programme while maintaining

capacity for disciplined investment in future

growth opportunities.

Board succession planning remained an important

area of focus as we continued to strengthen the breadth

of skills, experience and perspectives represented on

the Board. Having considered the needs of the Board in

the medium term and engaged with a number of very

high-quality candidates, we were pleased to appoint

Laurence Mulliez, Val Rahmani and Emma FitzGerald

as Non-executive Directors. They are all highly

experienced leaders and bring complementary skills,

perspectives and insights that will further strengthen

the Board and support Smiths as it delivers its strategy

and long-term growth ambitions. Further details of the

appointments and the Board succession process can

be found in the Nomination & Governance Committee

Report on page 66.

The Board also maintained a strong focus on

leadership development, culture, risk management and

internal controls. As Smiths evolved following the

completion of the divestments, the Board reviewed its

governance arrangements to ensure they remained

aligned with the needs of a more focused business,

including changes to the Board’s committee structure.

During the year, the Board also undertook an

effectiveness review, which concluded that the Board

and its Committees continue to operate effectively,

providing robust governance, effective oversight and

constructive challenge, while identifying opportunities

for further enhancement.

I would like to thank my fellow Directors and colleagues

across Smiths for their dedication, resilience and

commitment throughout a year of considerable change.

Their efforts have enabled the successful delivery of

major strategic milestones and position Smiths

strongly for the future.

Steve Williams

Chairman

In FY2026, and at the date of this report, the Company

applied the Principles and complied with all

applicable Provisions of the FRC’s UK Corporate

Governance Code 2024 (the Code) as explained

throughout this report.

A copy of the Code is available from the Financial

Reporting Council’s (FRC) website at frc.org.uk.

Further information about how we have applied the

Principles of the Code can be found in this report.

Further information

about our compliance

with the Code can be

found as follows:

Board leadership and

Company purpose

Page

56

Division of responsibilities

Page

60

Composition, succession

and evaluation

Pages 65 and 66

Audit, risk and internal

control

Page

69

Remuneration

Page

77

GOVERNANCE

REPORT

UK Corporate Governance Code compliance

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

55

Governance framework

The Board is responsible for promoting

the long-term sustainable success

of Smiths and creating value for

shareholders, while having regard to the

interests of other stakeholders.

It provides leadership by setting Smiths strategic

direction, overseeing the execution of strategy and

monitoring performance against agreed objectives,

while ensuring alignment with Smiths purpose, culture

and Values.

The Board also oversees Smiths risk management and

internal control framework, reviewing the principal and

emerging risks facing the business and assessing

Smiths viability and resilience. Through regular review

of financial and operational performance, strategic

priorities, capital allocation and organisational

capability, the Board seeks to support effective

decision-making and the sustainable creation and

protection of value.

The Board has established a governance framework

that promotes effective oversight and clear

accountability. This includes a Schedule of Matters

Reserved for the Board and delegated authority to its

Committees, each operating under formally approved

Terms of Reference. This framework ensures that the

Board receives timely and relevant information to

support robust discussion, constructive challenge and

effective decision-making.

The governance framework, including the Terms of

Reference for each of the Board’s Committees, is

reviewed annually and is available on our website at

www.smiths.com. The Directors may exercise all

powers of the Company, subject to applicable

legislation, regulation and the Company’s Articles of

Association.

Evolution of the Governance framework

The Board regularly reviews its governance

arrangements to ensure they remain aligned with

Smiths strategy, priorities and business needs.

During the year, the Board reviewed the role of the

Innovation, Sustainability & Excellence Committee and

concluded that, as innovation, sustainability and

operational excellence have become increasingly

integrated into the execution of Smiths strategy, a

dedicated committee was no longer required. The

Committee was therefore retired following the 2025

AGM, with oversight of these areas now forming part of

the Board’s regular consideration of strategy and

business performance.

In addition, following the successful completion of the

divestments of Smiths Interconnect and Smiths

Detection, the Board determined that the Separation

Oversight Committee had fulfilled its purpose and

approved its disbandment. The Committee had been

established to provide focused oversight of the

programme. Throughout its operation it supported

detailed oversight and timely decision-making between

scheduled Board meetings, helping to ensure the

successful completion of both transactions.

To support efficient decision-making between

scheduled Board meetings, the Board also established

the Chairman’s Committee, comprising the Chairs of

the Board Committees. The Committee is authorised to

act on behalf of the Board on delegated matters,

including M&A activity and other significant strategic

projects, with all decisions reported to the Board at the

next scheduled meeting.

Together, these changes ensure that Smiths

governance arrangements remain proportionate,

effective and aligned with Smiths strategic priorities.

ROLE OF

THE BOARD

Board

Board Committees

Nomination & Governance

Committee

Audit & Risk

Committee

Remuneration & People

Committee

Chairman’s

Committee

Advises the Board on the optimal

structure, size and composition

of the Board and its Committees.

It also leads the process for

Director appointments and

Director and senior management

succession planning.

Oversees the ongoing

effectiveness of the Smiths

governance framework.

Ensures the integrity of Smiths

financial reporting and audit

processes, and the maintenance

of sound internal control and risk

management systems, including

oversight of the Internal Audit

function and the Smiths ethics

and compliance activities.

Manages the relationship with

the external auditor, including

providing recommendations to

the Board and shareholders in

relation to the appointment and

reappointment of the external

auditor.

Responsible for Smiths

Directors’ Remuneration Policy

and reviews and oversees Smiths

remuneration strategy for the

Executive Directors and senior

management.

Oversees, on behalf of the Board,

the implementation of the People

strategy for Smiths.

Acts on behalf of the Board on

delegated matters between

scheduled Board meetings.

Executive Management Committees

Executive Committee

Investment Committee

Disclosure Committee

Assists the Chief Executive Officer in

discharging his responsibilities and is

collectively responsible for implementing

strategy, ensuring consistent execution and

embedding the culture and values.

Assesses high-value and high-risk

proposals, capital expenditure, M&A, asset

disposal and special revenue expenditure

projects which require Chief Executive

Officer or Board approval.

Advises the Chief Executive Officer and

the Board on the identification of inside

information, and the timing and method of

its disclosure.

Nomination & Governance

Committee report

Page

66

Audit & Risk Committee

report

Page

69

Separation Oversight

Committee report

Page

76

Remuneration & People

Committee report

Page

77

56

Smiths Group plc Annual Report FY2026

BOARD

BIOGRAPHIES

Julian Fagge

Chief Financial Officer

Appointed:

1 February 2025

Experience:

Julian joined Smiths as Group Financial

Controller and was subsequently appointed Group Strategy

and M&A Director, CEO of Flex-Tek and then President of

Smiths Interconnect, before being appointed Chief Financial

Officer. Prior to Smiths, Julian was Finance Director for UK

& Ireland at Royal Caribbean Cruises and worked at Procter

& Gamble. Julian is currently Non-executive Director at

NASCIT plc.

Skills and contribution to the Board:

Julian is a highly

experienced leader, with a strong focus on value accretion

and growth. He is experienced in strategy development,

M&A and finance. Julian is a Chartered Accountant qualified

with the Institute of Chartered Accountants of Scotland.

Pam Cheng

Non-executive Director

Appointed:

1 March 2020

Experience:

Pam is currently Executive Vice President,

Global Operations, IT & Chief Sustainability Officer at

AstraZeneca plc, a multinational pharmaceutical and

biopharmaceutical company. Prior to joining AstraZeneca,

Pam was President of MSD (Merck & Co., Inc.) in China. She

previously held various engineering and project

management positions at Universal Oil Products, Union

Carbide Corporation and GAF Chemicals.

Skills and contribution to the Board:

Pam’s experience in

the areas of research and development, manufacturing,

sales and marketing, commercial operations, supply chain

management and technology strengthen the Board’s

discussions on embedding world-class operations.

Steve Williams

Chairman

Appointed:

1 September 2023

Experience:

Steve is currently Chairman of Enbridge Inc. He

was previously Non-executive Chairman of Alcoa, Non-

executive Director at TC Energy Corporation, advisory Board

member of Canada’s Ecofiscal Commission and Board

member of the Business Council of Canada. Steve served as

President and Chief Executive Officer of Suncor Energy Inc.

Prior to this, he held a range of senior leadership positions at

Suncor and spent 18 years at Esso/Exxon in commercial,

operational and technical roles.

Skills and contribution to the Board:

Steve has nearly 50

years of international energy industry experience and a

strong track record of delivering growth and transformation,

creating value for customers, shareholders, employees and

communities. He brings extensive strategic leadership

experience and a focus on sustainable long-term value

creation.

Roland Carter

Chief Executive Officer

Appointed:

26 March 2024

Experience:

Roland has been with Smiths for over 35 years,

having joined as an apprentice and subsequently holding a

number of senior leadership roles, including President of

Smiths Detection, President of Asia Pacific for Smiths Group

and President of Smiths Interconnect, before being

appointed Chief Executive Officer.

Skills and contribution to the Board:

Roland has a strong

track record of innovation, sustainability and delivering

results, with deep operational and strategic experience

developed over three decades at Smiths. He has extensive

international experience, having worked in France, Germany,

the US and China.

Alister Cowan

Non-executive Director

Appointed:

1 July 2024

Experience:

Alister is currently Lead Independent Director

and Chair of the Audit, Risk and Finance Committee at The

Chemours Co. He is also currently Non-executive Director

and member of the HR & Compensation Committee and

Audit Committee at Pembina Pipeline Corporation.

Previously, Alister was Chief Financial Officer of Suncor

Energy Inc., Chief Financial Officer of Husky Energy Inc. and

held various positions with companies throughout Europe,

New Zealand and Canada.

Skills and contribution to the Board:

Alister has experience

at complex global public companies and brings deep and

wide-ranging experience in key end markets for Smiths,

notably in the energy and chemical sectors. Alister is a

member of the Institute of Chartered Accountants of

Scotland.

Dame Ann Dowling

Senior Independent Director

Appointed:

19 September 2018

Experience:

Dame Ann has had a distinguished academic

career and currently holds the position of Emeritus

Professor of Mechanical Engineering at the University of

Cambridge, having previously been Deputy Vice Chancellor

and Head of Engineering. Previously, she was Non-executive

Director and member of the Safety and Sustainability

Committee of BP plc and President and Chairman of

Trustees of The Royal Academy of Engineering.

Skills and contribution to the Board:

Dame Ann is

internationally recognised for her contribution to

engineering research. Her knowledge and background in

engineering, innovation and sustainability offer a different

perspective to Board discussions.

Key

Audit & Risk Committee

Chairman’s Committee

Nomination &

Governance Committee

Remuneration & People

Committee

Committee Chair

All Non-executive

Directors are independent

and, in the Chairman’s

case, independent on

appointment.

Other Directors who

served during FY2026

Karin Hoeing, Mark

Seligman and Noel Tata

retired from the Board in

FY2026. Their biographies

can be found in our FY2025

Annual Report.

The biographies of our

Executive Committee

members can be found

on our website.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

57

BOARD BIOGRAPHIES

CONTINUED

Laurence Mulliez

Non-executive Director

Appointed: 1 September 2026

Experience:

Laurence is currently Non-executive Director of

Siemens Energy AG. She was previously Chair of Voltalia SA

and Globeleq Ltd and Non-executive Director of Morgan

Advanced Materials plc, Aperam SA and SBM Offshore NV.

She was also CEO of Eoxis renewable energy. Laurence

began her career at BNP Paribas before going on to hold a

number of senior executive roles at BP across the USA,

Switzerland and the UK, in the oil and gas, chemicals and

lubricants sectors including Global CEO of Castrol Industrial

Lubricants.

Skills and contribution to the Board:

Laurence brings

strong strategic and sustainability expertise, underpinned by

a track record of driving performance and growth in global

industrial and energy businesses. Her international outlook

and experience with complex, capital-intensive businesses

are highly relevant to Smiths strategy.

Simon Pryce

Non-executive Director

Appointed:

1 February 2025

Experience:

Simon is currently Chief Executive of RS Group

plc. He was a Non-executive Director of RS and

Remuneration Committee Chairman until his appointment

as CEO. Prior to that he was Chief Executive of Ultra

Electronics Holdings plc and Chief Executive of BBA Aviation

plc.

Skills and contribution to the Board:

Simon is a highly

experienced business leader of customer focused, global,

industrial manufacturing and service businesses. He has a

strong track record of driving results and delivering

stakeholder outcomes through enhanced performance and

the effective execution of organic and inorganic growth

strategies. Simon is a Chartered Accountant.

Emma FitzGerald

Non-executive Director

Appointment effective: 1 November 2026

Experience:

Emma is currently Non-executive Director of

Seplat Energy plc, Newmont Corporation and the UK

National Energy System Operator. She was previously CEO

of Puma Energy International and held executive leadership

roles at Severn Trent plc and National Grid plc. She was

Non-executive Director at Graphene Manufacturing Group

Ltd, UPM-Kymmene Oyj, DCC plc and Cookson Group plc.

Emma spent over 20 years with Shell in research and

development, strategy, marketing and general management

across Europe, North America and Asia.

Skills and contribution to the Board:

Emma brings

international leadership experience across the energy,

industrials and infrastructure sectors, with expertise in

operational leadership, business transformation, energy

transition and customer-led technology commercialisation.

She is also an accredited Executive Coach.

Richard Howes

Non-executive Director

Appointed:

1 September 2022

Experience:

Richard is currently Chief Financial Officer of

Bunzl plc. He has held CFO positions at various multinational

businesses including Inchcape plc, Coats Group plc and

Bakkavor plc. Prior to this, Richard was at Dresdner

Kleinwort Benson and Ernst & Young.

Skills and contribution to the Board:

Richard brings

valuable insight to Board discussions, drawing on his

extensive experience in senior financial roles across various

sectors within large, listed companies. He is a Fellow of the

Institute of Chartered Accountants in England and Wales

(ICAEW).

Val Rahmani

Non-executive Director

Appointment effective: 1 October 2026

Experience:

Val is currently Non-executive Director of

London Stock Exchange Group plc. She is also a Non-

executive Director of RenaissanceRe Holdings Ltd and

Entrust Corporation. She was previously Non-executive

Director of Aberdeen Asset Management and Computer

Task Group. Val spent more than 25 years with IBM in senior

leadership roles, before serving as Chief Executive Officer of

Damballa.

Skills and contribution to the Board:

Val brings technology

and governance experience gained through executive and

non-executive roles in global businesses. Her experience

spans cyber security, AI and digital transformation,

alongside risk management, strategy and business

transformation, including major strategic transactions.

James Down

Group General Counsel & Company Secretary

Appointed:

10 April 2026

Having joined Smiths in 2016 and served in a number of

senior legal roles, including Divisional General Counsel of

Smiths Detection, James was appointed Group General

Counsel in June 2023 and Company Secretary in April 2026.

Prior to joining Smiths, James was senior counsel at former

FTSE 100 constituent SABMiller and spent his early career

at international law firm, Hogan Lovells.

Key

Audit & Risk Committee

Chairman’s Committee

Nomination &

Governance Committee

Remuneration & People

Committee

Committee Chair

58

Smiths Group plc Annual Report FY2026

HOW THE BOARD

OPERATES

day-to-day management of the business and for

developing and executing the strategy approved by

the Board.

To support informed decision-making, the Board

receives regular updates from executive management

on business performance, strategy execution, risk and

financial matters. Business Presidents, functional

leaders and external advisers attend Board and

Committee meetings as appropriate, providing insight

into operations, strategic priorities and talent pipeline.

The Chairman maintains regular engagement with the

Non-executive Directors, the Senior Independent

Director and Committee Chairs to support open

dialogue and effective Board operation. The Senior

Independent Director also leads the annual evaluation

of the Chairman’s performance.

The Board operates within a formal

Schedule of Matters reserved ensuring

that decisions of strategic, financial and

reputational significance are considered

at the appropriate level and supported by

effective oversight and accountability.

There is a clear separation of responsibilities between

the Board and executive management. The Chairman

leads the Board and is responsible for its effectiveness,

while the Chief Executive Officer is responsible for the

The Chair of the Remuneration & People Committee

acts as the Board’s designated workforce engagement

lead. During FY2026, Non-executive Directors engaged

with the business through Board meetings, site visits

and informal meetings outside the Board calendar with

colleagues from a range of functions and businesses.

Feedback from these engagements was reported

to the Board and relevant Committees and informed

discussions on culture, colleague engagement and

business performance. Recognising the importance

of operational engagement, the Board has planned

a series of site visits across the organisation

during FY2027.

Director attendance at Board and Committee meetings

during FY2026 is set out below.

Director attendance

Board

Nomination &

Governance

Committee

Audit & Risk

Committee

Remuneration &

People

Committee

Separation Oversight

Committee

1

Innovation,

Sustainability &

Excellence

Committee

2

Ad hoc Board

Committees

Steve Williams

6/6

4/4

–

6/6

3/3

–

6/6

Roland Carter

6/6

–

6/6

Julian Fagge

6/6

–

6/6

Alister Cowan

6/6

2/2

4

6/6

3/3

–

5/5

Pam Cheng

6/6

–

2/2

5

5/6

6

–

1/1

4/5

7

Dame Ann Dowling

6/6

2/2

4

–

6/6

–

1/1

5/5

Karin Hoeing

3

0/2

–

0/3

–

0/1

0/2

Richard Howes

6/6

4/4

6/6

–

3/3

–

5/5

Mark Seligman

3

2/2

4/4

–

3/3

–

2/2

Noel Tata

3

2/2

–

1/1

2/2

Simon Pryce

6/6

–

6/6

–

3/3

–

5/5

1

Following the completion of the divestment of Smiths Detection on 30 June 2026, the Separation

Oversight Committee was disbanded, as its remit was complete.

2

The Innovation, Sustainability & Excellence Committee was retired at the conclusion of the 2025 AGM.

3

Karin Hoeing, Mark Seligman and Noel Tata retired as Non-executive Directors at the conclusion of

the 2025 AGM. Denominators reflect periods of service accordingly.

4

Alister Cowan and Dame Ann Dowling were appointed to the Nomination & Governance Committee at

the conclusion of the 2025 AGM. Denominators reflect periods of service accordingly.

5

Pam Cheng was appointed to the Audit & Risk Committee at the conclusion of the 2025 AGM.

Denominators reflect periods of service accordingly.

6

Pam Cheng was unavailable for an ad hoc Remuneration Committee meeting in April 2026.

7

Pam Cheng was unavailable for an ad hoc Board meeting in June 2026.

Note: The Chairman’s Committee was established In June 2026 and no meetings have yet been held.

Board review

Page

65

Board activity and

key decisions

Read more on Board activity

and key decisions during

the year

Page

61

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

59

HOW THE BOARD OPERATES

CONTINUED

Division of responsibilities

Chairman

Senior Independent Director

–

Ensures the Board’s continued effectiveness

–

Shapes boardroom culture and encourages individual Director

engagement

–

Leads the Board and sets the Board agenda, determining the style and

tone of discussions at Board meetings

–

Leads the annual Board review

–

Supports the Chairman in the delivery of the Board’s objectives

–

Serves as an intermediary for the other Directors, if necessary

–

Is available to shareholders if they wish to raise any concerns

–

Leads the Chairman succession process

Chief Executive Officer

Non-executive Directors

–

Develops and proposes strategy to the Board

–

Sets and communicates Smiths culture and values

–

Leads the Executive Committee

–

Manages the day-to-day operations of the Company

–

Manages relationships with key stakeholders

–

Provide constructive challenge and strategic guidance to Board and

Committee discussions

–

Oversee management and the business and offer specialist advice

–

Assess the effectiveness of the systems of internal control and risk

management

Chief Financial Officer

Company Secretary

–

Supports the Chief Executive Officer in ensuring the development and

execution of strategy

–

Ensures the accuracy and completeness of Smiths financial statements

to ensure they are a true and accurate reflection of the Company’s

performance

–

Ensures Smiths operates robust risk management and internal control

systems to ensure accurate and timely financial and non-financial

reporting and ultimately to safeguard stakeholders’ interests

–

Supports the Chairman in the efficient and effective functioning of the

Board and its Committees

–

Ensures the Board receives quality information in a timely manner

–

Advises the Board on governance matters

Independent advice and insurance

Directors may seek independent professional advice, at

Smiths expense, to assist them in the discharge of their

duties. The Directors and Officers of the Company and

its subsidiaries are covered by Directors’ and Officers’

liability insurance. During FY2026, and up to the date of

this report, qualifying third-party indemnity provisions

(as defined by section 234 of the Companies Act 2006)

were in force for the Directors and Company Secretary

in respect of certain liabilities arising in connection with

the performance of their duties.

appointments are reviewed by the Board in advance,

taking into account potential conflicts of interest and

time commitments.

During FY2026, the Board concluded that the Chairman

and the Non-executive Directors devoted sufficient time

to fulfil their responsibilities to the Company, having

considered their commitments to other organisations.

Time commitment

All Directors are expected to devote sufficient time to

discharge their responsibilities effectively. Non-

executive Directors’ letters of appointment set out an

expected time commitment of 25 days per year, with the

Chairman, Committee Chairs and Senior Independent

Director committing additional time as required.

Executive Directors are not permitted to hold the

chairmanship or more than one non-executive

directorship in a FTSE 100 company, or any other

significant external appointment. Proposed external

Nomination & Governance

Committee report

Read more about Board

succession planning

Page

66

60

Smiths Group plc Annual Report FY2026

BOARD ACTIVITY

AND KEY DECISIONS

Strategy and financial performance

Portfolio transformation and capital returns

The Board oversaw and approved the actions required

to complete the divestments of Smiths Interconnect and

Smiths Detection, supporting the repositioning of

Smiths as a focused, premium industrial engineering

company. It also considered the allocation of the

separation proceeds, balancing the return of proceeds

to shareholders with the need to maintain financial

flexibility for future growth, strategic investment

opportunities and balance sheet strength.

In reaching its decisions, the Board considered the

interests of shareholders, employees, customers,

suppliers, governments and regulators. Its review

covered valuation, execution certainty, regulatory and

foreign investment approvals, employee consultation

requirements, transition service arrangements,

business continuity plans and alternative separation

options, including a potential demerger of Smiths

Detection. The Board also received regular updates on

employee communications, customer continuity and

transition planning, and reviewed investor feedback on

a range of capital return mechanisms, including share

buybacks, tender offers and special dividends.

Following consultation with shareholders, the Board

determined that the majority of the disposal proceeds

should be returned through an enhanced share

buyback programme and convened a General Meeting

to obtain the additional shareholder authority required

to undertake the programme. This will enable a

significant proportion of the disposal proceeds to be

returned to shareholders by the end of CY2027.

The following pages provide an overview

of the Board’s principal activities and key

decisions during FY2026. In reaching

these decisions, the Board considered

the interests of shareholders and other

key stakeholders, including employees,

customers, suppliers, communities

and regulators. Further information on

stakeholder engagement and how the

Board discharged its duties under section

172 of the Companies Act can be found

on page 63.

Together, the transactions delivered a combined

enterprise value of £3.3bn, ahead of expectations in

both timing and value. The Board concluded that the

transactions and associated capital allocation decisions

were in the best interests of the Company and its

stakeholders, enabling significant value to be returned

to shareholders while retaining the flexibility to invest

in future growth and support sustainable long-term

value creation.

Performance, markets and capital allocation

Through regular operational and financial reviews, the

Board challenged performance, assessed progress

against strategic objectives and informed the allocation

of capital across the portfolio, including Smiths

Interconnect and Smiths Detection until their respective

transactions completed. This ensured resources

remained focused on the areas of greatest opportunity

and supported disciplined growth and long-term

value creation.

The Board also received updates from external experts

on geopolitical, macroeconomic and capital market

developments. These insights supported its

assessment of future growth opportunities and helped

ensure continued alignment between Smiths strategy,

capital structure and financing arrangements.

As part of its oversight of capital allocation and financial

resilience, the Board considered the long-term

sustainability of Smiths pension arrangements,

including the completion of a landmark £760m buy-in of

the Smiths Industries Pension Scheme (SIPS) in July

2026. The Board considered the interests of pension

CEO review

Read more about capital

allocation in the CEO review

Page

10

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

61

People and culture

Board composition and succession

The Board maintained a strong focus on leadership,

succession and culture throughout the year. As part of

its ongoing succession planning, it reviewed its

composition to ensure an appropriate balance of skills,

experience and perspectives, and approved the

appointments of Laurence Mulliez, Val Rahmani and

Emma FitzGerald as Non-executive Directors. These

appointments strengthened the Board’s capabilities to

support the business into the next phase of its strategy.

Leadership, culture and wellbeing

The Board reviewed executive succession and

leadership development plans to help ensure Smiths

maintains a strong and diverse pipeline of talent

capable of supporting its long-term strategic

objectives. Workforce engagement activities

undertaken by the Non-executive Directors, together

with regular updates on employee engagement, culture

and organisational effectiveness, provided valuable

insight into colleague perspectives and helped inform

the Board’s discussions and decision-making. The

Board maintained oversight of health, safety and

wellbeing performance across Smiths, supporting the

continued development of a strong safety culture.

The Board also monitored culture through colleague

survey results, workforce engagement feedback,

health and safety performance, Speak Out reporting,

Ethics & Compliance updates, talent and succession

planning activities and cultural review work. This

enabled the Board to assess the effectiveness of

actions taken to strengthen Smiths culture and

leadership capability, supporting continued alignment

between behaviours, purpose, Values and strategic

priorities.

Responsible business and communities

The Board considered proposals for the future funding

of the Smiths Foundation, including retaining a portion

of the proceeds from the divestments of Smiths

Interconnect and Smiths Detection. In doing so, it

considered the interests of communities, employees

and shareholders, and how the Company’s financial

resources could support community engagement,

scheme members, shareholders and employees, the

Trustee’s role in executing the transaction and the

benefits of reducing future pension risk and balance

sheet volatility. The Board supported the transaction,

which secured the benefits of more than 10,000

members and means that all c.17,000 SIPS members

are now fully insured across five annuity policies. The

process was completed using existing scheme assets,

with no additional contributions required from Smiths.

The transaction secured members’ benefits, reduced

legacy pension risk and enhanced financial flexibility

for Smiths.

Growth strategy and M&A

As part of its oversight of Smiths growth agenda, the

Board approved the acquisition of DRC Heat Transfer,

expanding Flex-Tek’s thermal management capabilities

and strengthening its position in attractive growth

markets. In May, the Board also approved the next

phase of Smiths strategy, reaffirming its focus on

delivering growth and creating long-term value for

shareholders.

Sustainability and innovation

The Board monitored delivery of the Group’s

sustainability strategy and reviewed progress against

its environmental commitments, including emissions

reduction and renewable energy initiatives. The Board

also considered how innovation and new product

development are enabling the business to capture

growth opportunities linked to energy transition,

electrification, resource efficiency and other structural

market trends.

Financial planning and reporting

The Board also approved the FY2027 financial plan,

external financial reporting and the Group Tax Strategy,

providing a clear framework for the delivery of Smiths

strategic and financial objectives while maintaining

transparent communication with shareholders and

other stakeholders.

charitable initiatives and colleague-led programmes

while remaining focused on long-term value creation.

The Board approved an additional £18.51m (reflecting

our founding year) contribution to the Foundation,

reinforcing Smiths long-standing commitment to

supporting the communities in which it operates and

advancing STEM-related initiatives. It also approved the

Modern Slavery Statement, reinforcing Smiths

commitment to responsible business practices and

high standards of governance.

Governance, risk and oversight

Risk, controls and resilience

The Board continued to oversee the effectiveness of

Smiths governance, risk management and internal

control frameworks, supporting the long-term

resilience of the business. During the year, it reviewed

and approved Smiths principal risks and maintained

oversight of cyber security and resilience capabilities.

This included oversight of management’s response to

the January 2025 cyber security incident, including IT

general controls, the financial close process and wider

business continuity actions. The Board also reviewed

the Flex-Tek subsidiary balance sheet overstatement

disclosed in the FY2025 Annual Report, which resulted

in improvements to financial controls, balance sheet

review processes, governance arrangements and

accountability frameworks.

Governance framework and Board effectiveness

To reflect the completion of Smiths portfolio

transformation programme, the Board approved

changes to the governance framework, including the

disbandment of the Separation Oversight Committee

and the establishment of the Chairman’s Committee.

The Board also completed an effectiveness review and

agreed actions to support its continued development.

BOARD ACTIVITY AND KEY DECISIONS

CONTINUED

ERM framework

See ERM framework

Page

34

Talent

Read more about our

customers

Page

8

People

How the Board engaged

Outcome

People

Received updates on colleague wellbeing, organisational change, capability

requirements and support during the divestments of Smiths Interconnect and

Smiths Detection. The Board considered the importance of retaining and

engaging colleagues through the divestment process, maintaining business

performance and ensuring affected employees were appropriately supported.

Helped shape workforce priorities and talent strategies, supporting the transition

to a more focused Smiths portfolio while maintaining colleague engagement and

building capability for future growth.

Safety and

wellbeing

Reviewed safety performance, including near misses, recordable events,

injury and illness data, together with progress on Safety and Wellbeing

Fundamentals training.

Reinforced the focus on continuous safety improvement and embedding a strong

safety culture across Smiths.

Employee

engagement and

development

Considered feedback from the culture survey and received updates on early

careers, learning and development, succession planning and the

implementation of Workday.

Informed actions to strengthen engagement, develop talent and invest to ensure

Smiths has the culture and capabilities needed to deliver its strategy.

Customers

How the Board engaged

Outcome

Customers

Received updates through divisional business reviews and strategic

deep-dives, enabling the Board to monitor customer demand, delivery

performance, innovation and market opportunities.

Reinforced the focus on customer value, sustainable growth and operational

excellence. Supported investment in differentiated technologies, strengthening

long-term customer relationships and positioning Smiths to capture growth

opportunities in attractive markets.

Operational

performance

Reviewed progress against key operational targets supporting customer

delivery.

Improved operational performance, including lead times and delivery capability,

supporting better outcomes for customers.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

63

SECTION 172 STATEMENT AND STAKEHOLDER ENGAGEMENT

CONTINUED

Suppliers

How the Board engaged

Outcome

Suppliers and partners

Received supplier-related updates through divisional business reviews and

strategic deep-dives, supporting the Board’s oversight of supply chain resilience,

supplier relationships, operational performance and customer delivery.

Reinforced the importance of resilient supply chains and strategic partnerships in

delivering sustainable growth and customer value.

Responsible sourcing

Received updates on supplier management and oversight, including the

Supplier Code of Conduct and the use of the EcoVadis platform.

Strengthened supplier accountability and supported Smiths objectives on

sustainability, ethical sourcing and compliance objectives.

Communities

How the Board engaged

Outcome

Communities

Considered Smiths wider contribution through local employment, responsible

operations and community investment, including activities marking the

Company’s 175th anniversary.

Reinforced Smiths commitment to creating long-term value for society alongside

shareholders.

Community investment

Reviewed proposals to enhance the long-term funding of the Smiths

Foundation and received updates on charitable initiatives and STEM

programmes.

Approved increased funding for the Smiths Foundation, helping extend the

Foundation’s impact in communities where Smiths operates.

Responsible business

practices

Received updates on community engagement activities, Smiths Tax Strategy

and other operations that affect wider stakeholders.

Ensured Smiths continued to operate responsibly, supporting sustainable business

practices and maintaining trust with wider society.

Governments and regulators

How the Board engaged

Outcome

Governments and

regulators

Considered engagement with governments, policymakers and regulators

across key markets and received updates on regulatory developments

affecting Smiths.

Supported compliance with evolving regulatory requirements and helped ensure

Smiths interests were appropriately represented in key markets.

Strategic transactions

and regulatory

approvals

Reviewed regulatory matters relating to the divestments of Smiths

Interconnect and Smiths Detection, including antitrust and foreign investment

approvals, French works council consultation requirements and market

disclosure obligations.

Supported the successful execution of strategic transactions while maintaining

regulatory compliance, operational continuity and appropriate engagement with

relevant authorities and employee representative bodies.

Geopolitical and

regulatory risk

Considered geopolitical developments, including elevated Middle East

tensions, and their potential impact on colleagues, together with the impact of

new tariffs on our businesses.

Informed risk management and business continuity planning, helping Smiths

respond effectively to external challenges and protect its people and operations.

Investors

How the Board engaged

Outcome

Shareholders and

capital providers

Considered feedback from shareholders on portfolio transformation, capital

allocation and the return of proceeds following the divestments of Smiths

Interconnect and Smiths Detection.

Informed the Board’s approach to capital allocation, shareholder distributions and

strategic direction, while supporting a clear narrative for long-term value creation.

Investor engagement

Received updates on investor engagement activities, including results

presentations, shareholder meetings and discussions with current and

prospective investors.

Enhanced the Board’s understanding of investor priorities and market

expectations, supporting effective decision-making and communication.

Shareholder dialogue

Engaged with shareholders through the AGM and other investor events,

providing opportunities for feedback and discussion.

Strengthened transparency and trust, while ensuring shareholder perspectives

were reflected in Board discussions and decision-making.

Culture and sustainability

Read more about

supply chain

Page

21

64

Smiths Group plc Annual Report FY2026

BOARD

REVIEW

The Chairman is responsible for overseeing the annual review of the performance

of the Board, its Committees and individual Directors.

In FY2025, the Board Review was externally facilitated as described in the FY2025 Annual Report. Progress against

the priorities identified in that review is set out below.

FY2026 – internally facilitated

Board review

In FY2026, the Board conducted its annual

effectiveness review in accordance with the UK

Corporate Governance Code. The evaluation was led

internally and supported by a Lintstock questionnaire-

based assessment, incorporating feedback from all

Directors on the performance of the Board and its

Committees. The findings were considered by the

Board as part of its ongoing commitment to continuous

improvement. Lintstock is independent of the Company

and provides no other services to Smiths.

The review concluded that the Board and its

Committees continue to operate effectively. Feedback

highlighted a cohesive and engaged Board culture,

strong leadership from the Chairman, high-quality

debate, effective Committee oversight and constructive

relationships between Non-executive Directors and

management. Directors recognised the significant

progress made in recent years in reshaping the

business, clarifying Smiths strategic direction and

strengthening the foundations for future growth. The

Board’s annual strategy session was also identified as a

particular strength.

The review identified several areas for continued focus

as Smiths enters its next phase. These include

maintaining oversight of the execution of Smiths

strategy, supporting sustainable organic growth

through innovation, considering value-creating

acquisition opportunities, strengthening visibility of

leadership talent and succession below Executive

Committee level, and enhancing the Board’s external

perspectives on customers, markets and emerging

technologies. The review also highlighted the

importance of ensuring that Board capabilities continue

to evolve in line with Smiths strategic priorities.

FY2025 priorities

Progress made in FY2026

–

Continuing to develop Smiths longer-term strategy

including the Board’s evolving risk appetite

–

The Board maintained regular oversight of Smiths longer-term strategy and evolving risk appetite through strategy

updates during the year.

–

Increasing visibility of the external landscape

–

The Board supplemented management reporting with external geopolitical and market perspectives, including sell-side

and buy-side views, supporting its understanding of the external landscape. Market, customer and supplier insights were

also provided through CEO and strategy updates and business reviews.

–

Managing transformational change with an ongoing

focus on Board composition, executive leadership

development and overall culture

–

The Nomination & Governance Committee maintained regular oversight of Executive and Non-executive succession,

supporting continued focus on Board composition and leadership capability. Culture and people strategy updates were

also considered during the year by the Board and relevant Committees.

–

Developing the Board to work as a trusted team with

increasing opportunities for informal collaboration

among Board members

–

Informal engagement between Directors increased through Board dinners and shared site visits, supporting Board

cohesion and collaboration.

–

Increasing site visits and workforce engagement

opportunities

–

The Board increased direct engagement with the businesses and workforce through one overseas Board meeting and 7

Director visits to John Crane, Flex-Tek and other Smiths sites in the UK, USA, Canada and Czechia.

The Board has agreed a number of priorities for

FY2027, including:

–

Supporting the delivery of Smiths growth strategy;

–

Maintaining oversight of organisational capability,

talent and succession;

–

Increasing engagement with the businesses

through site visits and interaction with future

leaders; and

–

Continuing to review the Board’s composition to

ensure it has the skills, experience and perspectives

required for the future.

Progress against these priorities will be monitored

throughout the year as part of the Board’s regular

effectiveness activities.

CEO review

Read more about strategy

Page

8

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Overview

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Governance

Financial statements

65

NOMINATION &

GOVERNANCE

COMMITTEE

REPORT

Board succession planning was a key priority during

the year. Following the 2025 AGM, the Committee

initiated a search for a new Non-executive Director,

supported by Russell Reynolds Associates, which

resulted in the appointment of Laurence Mulliez with

effect from 1 September 2026. Following the Board’s

strategy review in May 2026, the Committee undertook

a further search during the year, supported by Heidrick

& Struggles, and subsequently recommended the

appointments of Val Rahmani and Emma FitzGerald as

Non-executive Directors. Together, these appointments

further strengthen the breadth of skills, experience and

perspectives represented on the Board.

The Committee also continued to oversee succession

planning and leadership development below Board

level. During the year, we reviewed Smiths talent

pipeline and supported a number of initiatives designed

to develop future leaders, including the introduction of a

Board mentoring programme for Executive Committee

members, a structured Executive Committee

development programme and a pilot development

programme for high-potential leaders.

Governance remained a key area of focus for the

Committee during the year. To support the next phase

of the Smiths strategy following the strategic actions

announced in January 2025, the Committee reviewed

Smiths governance framework, including the future

role of the Separation Oversight Committee and the

composition of the Board Committees. This led to the

disbandment of the Separation Oversight Committee

following completion of its remit and the establishment

of a new Chairman’s Committee, helping to ensure the

Smiths governance arrangements remained aligned

with the evolving business. Changes to Committee

memberships were also made to support orderly

succession planning and maintain an appropriate

balance of skills, experience and workload across

the Board.

Chairman’s statement

I am pleased to present the

Nomination & Governance

Committee’s Report for FY2026.

This was a particularly active year

for the Committee, as we supported

the Board through a period of

significant strategic change and

continued to ensure that the Board

and wider leadership pipeline are

well positioned for the future.

Steve Williams

Chairman of the Nomination

& Governance Committee

Committee membership

Steve Williams

Alister Cowan

Dame Ann Dowling

Richard Howes

Top Committee activities

this year

–

Board succession

planning, including the

appointment of three new

Non-executive Directors

–

Review of the Board’s

governance framework

–

Oversight of governance

arrangements following

the Smiths Detection

divestment

Further details of the Committee’s activities during the

year are set out in this report. On behalf of the

Committee, I would like to thank my fellow members

for their continued commitment and contribution

throughout the year.

Steve Williams

Chairman of the Nomination

& Governance Committee

Committee membership and meetings

Details of the Committee members, their biographies

and attendance at meetings during the year are set out

on pages 57 to 59. The Chief Executive Officer is

normally invited to attend Committee meetings,

together with the Group General Counsel & Company

Secretary and the Director of Governance who provide

support to the Committee. Other members of senior

management, including the Chief Financial Officer and

the Chief People, Sustainability & Excellence Officer,

are invited to attend as required.

Committee performance review

In FY2026, the performance of the Committee was

considered as part of the wider Board review process

described on page 65. Overall, it was confirmed that the

Committee continues to operate effectively.

Non-executive succession

As part of its ongoing succession planning activities,

the Committee reviewed the composition of the Board

to ensure it maintained an appropriate balance of skills,

experience and diversity to support the delivery of the

Smiths strategy. During the period, the Committee led

a number of Non-executive Director appointment

processes, supported by Russell Reynolds and Heidrick

& Struggles. Following rigorous selection processes,

the Committee recommended the appointments of

Laurence Mulliez, Val Rahmani and Emma FitzGerald

as independent Non-executive Directors.

The Committee was satisfied that each candidate

brought complementary skills and experience to the

Board. Laurence brings extensive strategic and

sustainability experience; Val brings deep expertise in

66

Smiths Group plc Annual Report FY2026

NOMINATION & GOVERNANCE COMMITTEE REPORT

CONTINUED

technology, cyber security, digital and AI; and Emma

adds significant customer-led innovation experience

across the energy, industrials and infrastructure

sectors. Together, these appointments further

strengthen the breadth of skills, experience and

perspectives represented on the Board, support the

delivery of Smiths strategy and contribute to orderly

Board succession planning as Dame Ann Dowling

approaches nine years’ service on the Board in 2027.

Governance

During the period, the Committee oversaw further

changes to Smiths governance framework to ensure it

remained aligned with Smiths strategic priorities and

evolving business profile. Following the 2025 AGM, the

Innovation, Sustainability & Excellence Committee was

retired, reflecting the increased integration of

innovation, sustainability and operational excellence

across Smiths. These matters are now considered by

the Board as a whole, and by its existing Committees

where appropriate, as part of their oversight of strategy,

performance and risk.

The Committee also considered the governance

structures required to support effective Board

oversight as Smiths strategic actions progressed.

Following completion of the divestment of Smiths

Detection, the Board confirmed the establishment of a

Chairman’s Committee, with delegated authority to act

on behalf of the Board between scheduled meetings

where necessary. The Separation Oversight

Committee, which had provided focused oversight of

the divestments of Smiths Interconnect and Smiths

Detection, was disbanded having fulfilled its remit.

Committee composition was also reviewed to ensure

that each Committee remained appropriately

constituted following recent Board appointments and

other planned changes. Laurence Mulliez joined the

Audit & Risk Committee with effect from 1 September

2026. Val Rahmani will join the Audit & Risk Committee

with effect from 1 October 2026, at which point Pam

Cheng will step down from the Committee. Emma

FitzGerald will join the Nomination & Governance

Committee with effect from 1 November 2026, at which

point Alister Cowan will step down from the Committee.

These changes support orderly Committee succession,

maintain an appropriate balance of skills, experience

and workload across the Board, and enable each of the

new Non-executive Directors to contribute where their

experience is most relevant.

Induction

To support effective onboarding, each new Director

receives a tailored induction programme designed to

build a comprehensive understanding of strategy,

businesses, governance framework, culture and key

stakeholders. Induction programmes are being

developed for Laurence Mulliez, Val Rahmani and

Emma FitzGerald and are expected to include meetings

with senior leaders, briefings from external advisers

and visits to operational sites across the business.

These programmes support each Director’s integration

into the Board and enable them to contribute effectively

to Board discussions and decision-making from an

early stage.

Information and training

To discharge their responsibilities effectively, Directors

require access to accurate, timely and high-quality

information. The Governance team supports the

Chairman and Chief Executive Officer in ensuring

effective information flows and that Directors receive

the materials required to fulfil their responsibilities.

Employees responsible for preparing Board and

Committee papers also participate in regular

workshops designed to enhance the clarity, quality and

effectiveness of information provided to the Board.

The Board is committed to the continuous development

of its Directors and receives regular updates on

matters relevant to Smiths strategy, operations and

external environment. During the period, the Board

received briefings from internal and external experts

on topics including the macroeconomic environment,

geopolitics, investor expectations and developments in

global capital markets. Directors also received updates

from business leaders, functional specialists and

external advisers to support their understanding of key

strategic, operational, regulatory and governance

matters. Individual development requirements are

reviewed annually as part of the Board effectiveness

review process.

Independence and objectivity

The Committee is responsible for assessing the

independence of the Non-executive Directors in

accordance with the Code. As part of its annual review

in July 2026, the Committee concluded that each

Non-executive Director continued to demonstrate

independence of judgement and character.

The Committee also specifically considered the

continued independence of Dame Ann Dowling, who

has served on the Board for more than six years. It was

satisfied that Dame Ann continues to provide robust

challenge, independent oversight and valuable

contribution to the Board.

Director election and re-election

Each year, all Directors are subject to election or

re-election by shareholders at the AGM, supporting

continued accountability to shareholders. Following its

review, the Board is satisfied that each Non-executive

Director standing for election or re-election continues

to be effective, demonstrates independent judgement

and has the necessary time and commitment to

discharge their responsibilities. Further information on

Directors’ expected time commitments is set out on

page 60. The Senior Independent Director has

confirmed, on behalf of the Board, that the Chairman

continues to be effective and supports his re-election at

the AGM. The appointment and replacement of

Directors is governed by the Company’s Articles of

Association and the Companies Act 2006. The Articles

of Association are available on our website and may

only be amended by special resolution of shareholders.

Conflicts of interest

All Directors are required to avoid situations in which

they have, or could have, a direct or indirect interest

that conflicts, or may conflict, with the interests of

Smiths. In accordance with the Company’s Articles

of Association and the Companies Act 2006, the

Board has authority to approve potential conflicts.

Board biographies

See our Board biographies

Page

57

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Financial statements

67

NOMINATION & GOVERNANCE COMMITTEE REPORT

CONTINUED

Directors must obtain Board approval before accepting

any new external appointment, whether or not it gives

rise to a potential conflict. The Company Secretary

maintains a Register of Conflicts, which is reviewed by

the Directors at least twice a year, and the Board may

vary or terminate any authorisation previously granted.

Diversity

Diversity of thought, background and experience

supports the effectiveness of the Board and its

Committees, and contributes to robust decision-

making and oversight of Smiths. In line with the Board

Diversity Policy, which is available on our website, the

Committee considers diversity in its broadest sense as

part of Board composition, appointments and

succession planning.

The Committee keeps the composition of the Board and

its Committees under review, taking account of Smiths

strategic priorities, the skills and experience required,

and the Board’s diversity objectives. Appointments are

made on merit, following a formal, rigorous and

transparent process.

The Committee takes account of the recommendations

of the FTSE Women Leaders Review and the Parker

Review, as well as the diversity-related requirements of

the UK Listing Rules. Numerical diversity data as at

31 July 2026, presented in the format required by

Listing Rule 6.6.6R(10), is set out below. The data has

been collected through voluntary self-disclosure by the

Board and executive management, who were asked to

disclose the characteristics with which they identify.

As at 31 July 2026, the Board did not meet all of its own

diversity targets or those set out in Listing Rule

6.6.6R(9)(a). However, following the planned Board

changes, women will represent 46% of the Board as at

1 November 2026.

To support its diversity objectives, the Committee uses

executive search firms that adhere to the enhanced

Code of Conduct on gender diversity and best practice.

Diversity performance

against targets

Gender – Board

Policy target

At least 40% of the Board to be female

Female

25%

Male

75%

Policy target 40%

31 July 2026

Gender – Key Board positions

Policy target

At least one of the Chairman, Senior

Independent Director, Chief Executive Officer

or Chief Financial Officer position will be held

by a female

Female

1

Male

3

Policy target 1

31 July 2026

Ethnicity

Policy target

At least one Director from an ethnic minority

background

Ethnic minority

1

White

7

Policy target 1

31 July 2026

Gender diversity

Diversity information for

Smiths can be found on

Page

27

.

The Board Diversity Policy

can be found on our website.

Sex/gender representation

Number of

Board members

Percentage

of the Board

Number of senior

positions on the Board

(CEO, CFO, SID

and Chair)

Number

in executive

management

1

Percentage

of executive

management

1

Men

6

75%

3

6

86%

Women

2

25%

1

14%

Not specified/prefer not to say

–

Ethnicity representation

White British or other

white (including minority

white groups)

7

87.5%

4

6

86%

Mixed/Multiple ethnic groups

0

Asian/Asian British

1

12.5%

0

1

14%

Black/African/Caribbean/

Black British

0

Other ethnic group including

Arab

0

Not specified/prefer not to say

–

1

Defined as the Executive Committee and the Company Secretary in accordance with Listing Rule 6.6.6R(10).

68

Smiths Group plc Annual Report FY2026

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COMMITTEE

REPORT

Financial reporting was a significant area of activity

during the year, particularly in relation to the accounting

judgements associated with the divestments of Smiths

Interconnect and Smiths Detection. The Committee

reviewed the related reporting, disclosure and control

considerations, challenged management and KPMG on

key judgements, and satisfied itself that the matters

were appropriately reflected in Smiths reporting.

We also continued to oversee the enhancement of

Smiths internal control framework, including

preparations for Provision 29 of the 2024 UK Corporate

Governance Code requirements that become effective

for FY2027 reporting. This included reviewing the

effectiveness of key controls, remediation activity and

areas requiring further management focus.

Within this broader programme, a key area of focus

was the review of the Flex-Tek subsidiary balance sheet

overstatement disclosed in the FY2025 Annual Report.

The Committee reviewed the accounting adjustments,

challenged management’s remediation plans and

monitored implementation throughout the year.

The matter reinforced the importance of maintaining

strong financial controls and governance disciplines

and resulted in a number of enhancements across

the business.

Alongside its oversight of the control environment, the

Committee continued to monitor Smiths principal risks,

cyber security, ethics and compliance arrangements,

sustainability reporting and performance against key

sustainability targets, pension funding, investment

and de-risking activities, and the effectiveness of

Internal Audit. Together, these activities provided

assurance over Smiths risk management, control and

governance framework as Smiths continued to execute

its strategic priorities.

The Committee continued to monitor the effectiveness

and independence of KPMG as external auditor,

including the additional work required in connection

with the divestment transactions. We also commenced

planning for the FY2027 external audit tender process.

Chair’s statement

I am pleased to present the Audit &

Risk Committee’s Report for FY2026.

This was a year of significant activity,

as Smiths completed the strategic

actions announced in January

2025 to divest Smiths Interconnect

and separate Smiths Detection,

repositioning Smiths as a focused,

premium industrial engineering

company. Against this backdrop, we

focused on the areas most relevant

to supporting the Board through

a period of change including the

quality and integrity of financial

reporting, the strength of the control

environment and the effective

oversight of risk.

Richard Howes

Chair of the Audit & Risk

Committee

Committee membership

Richard Howes

Pam Cheng

Alister Cowan

Simon Pryce

Top Committee activities

this year

During FY2026 the

Committee focused on:

–

Financial reporting

associated with the

divestments of Smiths

Interconnect and Smiths

Detection

–

Oversight of the Flex-Tek

subsidiary balance sheet

review and associated

remediation actions

–

Enhancement of

Smiths internal control

framework and

preparation for Provision

29 reporting

–

Review of principal and

emerging risks

–

Oversight of pension

funding and de-risking

activities

–

Assessment of external

audit effectiveness and

preparation for the audit

tender

Looking ahead, our priorities will include completion of

the external audit tender process, continued

enhancement of Smiths material controls framework

and oversight of risks associated with operating as a

focused, premium industrial engineering company.

I would like to thank my fellow Committee members,

management, Internal Audit, KPMG and the

Governance team for their support and contribution

throughout the year. We remain committed to

supporting the Board through robust oversight

of financial reporting, risk management and

internal controls.

Richard Howes

Chair of the Audit & Risk Committee

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

69

AUDIT & RISK COMMITTEE REPORT

CONTINUED

Committee membership and meetings

The Audit & Risk Committee comprises independent

Non-executive Directors with a broad range of

financial, accounting and sector experience. The Board

considers that three members have recent and relevant

financial experience for the purposes of the UK

Corporate Governance Code and is satisfied that the

Committee, as a whole, has competence relevant to

Smiths sector. Collectively, members bring a strong

understanding of the financial, operational, regulatory

and risk matters affecting Smiths. Biographies and

attendance records are set out on pages 57 to 59.

The Chief Executive Officer, Chief Financial Officer and

KPMG lead audit partner attended Committee

meetings by invitation. Regular attendees also included

the Group General Counsel & Company Secretary,

Group Financial Controller, Director of Internal Audit

and Risk, Head of Ethics and Compliance, Director of

Governance and other senior executives, as required.

The Committee held private sessions with the external

auditor and the Director of Internal Audit at each

meeting, without management present, to support

open and independent discussion. The Heads of

Internal Audit and Ethics & Compliance, together with

the external auditor, have direct access to the

Committee Chair.

Meetings are aligned with Smiths financial reporting

cycle and follow an annual programme of work,

enabling the Committee to discharge its responsibilities

for financial reporting, risk management, internal

controls and external audit oversight. The Committee

Chair reported on the Committee’s work to the Board

following each meeting.

The Committee followed the Audit Committees and the

External Audit: Minimum Standard during FY2026.

Committee performance review

As part of the annual Board review process described

on page 65, the Board again confirmed that the

Committee continues to operate effectively, fulfilling its

responsibilities and supporting the Board in meeting its

obligations.

Committee activities

Financial and narrative reporting

The Committee reviewed the FY2026 half-year and

full-year results announcements, the Annual Report,

and the Going Concern and Viability Statement before

recommending them to the Board for approval. This

review was undertaken against the backdrop of the

strategic actions announced in January 2025 to divest

Smiths Interconnect and Smiths Detection,

repositioning Smiths as a focused, premium industrial

engineering company.

As part of its review, the Committee considered the

quality and integrity of Smiths financial reporting, the

effectiveness of the related control environment and

the appropriateness of disclosures to shareholders.

The Committee received management certifications

from the businesses and considered reports from

management and KPMG on the significant reporting

matters arising during the year, including separation

accounting for Smiths Interconnect and Smiths

Detection, profit on disposal judgements and estimates,

post-retirement benefit de-risking, taxation,

provisioning and the presentation of headline profit.

For each of these areas, the Committee challenged

management and KPMG on the key assumptions, the

level of estimation uncertainty, the availability of

alternative accounting treatments and the clarity of the

related disclosures. Following this review, the

Committee concluded that the positions adopted were

reasonable, supportable and appropriately explained in

Smiths reporting. Details of the principal areas of

judgement are set out on pages 71 and 72.

Sustainability reporting and assurance

The Committee monitored progress against

sustainability targets and metrics. It also oversaw

Smiths preparedness for new sustainability reporting

and assurance requirements, including the supporting

governance and control framework.

Fair, balanced and understandable

The Committee reviewed the FY2026 Annual Report to

assess whether, taken as a whole, it is fair, balanced

and understandable and provides shareholders with

the information needed to assess Smiths position,

performance, business model and strategy.

As part of this review, the Committee considered the

consistency and balance of reporting across the Annual

Report, including disclosures on strategy, performance,

principal risks, internal controls, going concern and

viability, and significant judgements and estimates. It

also reviewed Smiths internal verification and review

processes, feedback from KPMG, and whether key

matters considered during the year, including the

divestments and Flex-Tek control matters, had been

appropriately and transparently reflected.

Following its review, the Committee recommended to

the Board that the FY2026 Annual Report be confirmed

as fair, balanced and understandable, which the Board

approved.

Independent auditor’s

report

Page

93

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CONTINUED

Significant financial reporting matters

The key areas of judgement for FY2026 are as follows:

Areas of focus

Actions taken

Interconnect, Detection and Flex-Tek General Industrial separation accounting

Following the completed disposals of Smiths

Interconnect, Smiths Detection and two of

Flex-Tek’s General Industrial businesses, the

presentation of discontinued operations,

businesses held for sale and the related gain

on disposal required judgement and

estimation.

The Committee reviewed management’s assessment of the accounting treatment for the completed disposals and the continued classification of the

remaining Flex-Tek General Industrial businesses as held for sale. This included consideration of the relevant IFRS requirements, the progress of each

disposal process, the presentation of the results and net assets of discontinued operations and the impairment/fair value less costs of disposal judgement

previously recognised for the Flex-Tek General Industrial businesses.

The Committee also considered KPMG’s year-end audit procedures over the accounting and disclosure for the completed disposals and the remaining

businesses classified as held for sale. This included procedures over cut-off, classification as discontinued operations, held-for-sale presentation,

impairment or fair value less costs of disposal judgements, and the related financial statement disclosures.

Following detailed reports and discussion with management and KPMG, the Committee concurred with management’s proposed treatment and the

related disclosure approach for the FY2026 financial statements.

The Committee also noted KPMG’s updated risk assessment following the completion of the Smiths Detection disposal.

Profit on disposal judgements and estimates

Smiths has recognised a significant profit on

disposal of discontinued operations from its

completed strategic transactions. The profit

calculation requires judgement over carrying

values, transaction and separation costs,

foreign currency reserve recycling and

related completion adjustments.

The Committee reviewed management’s estimate of the profit on disposal, including the assumptions supporting the calculation of proceeds, carrying

values, transaction and separation costs and foreign currency reserve recycling. It challenged management on the basis for the estimates and the

treatment of items recognised within discontinued operations.

The Committee considered KPMG’s audit focus on the disposals, including inspection of the relevant sale agreements, review of management’s accounting

papers, procedures over completion adjustments and recalculation of the gain or loss on disposal. It also considered the evolution of the separation

accounting judgements from FY2025, including the earlier classification of Smiths Interconnect as held for sale and discontinued, and the reclassification

of Smiths Detection and certain Flex-Tek General Industrial businesses as held for sale and discontinued from HY2026.

The Committee agreed that the proposed judgement and disclosure approach was appropriate.

Post-retirement benefit de-risking

Smiths completed material pension

de-risking activity during FY2026, including

the TI Group Pension Scheme (TIGPS) buyout

and a final buy-in transaction for the Smiths

Industries Pension Scheme (SIPS). The

accounting involves judgement over the

settlement charge, recognition of any

residual asset and potential future refunds.

The Committee reviewed the accounting implications of the completed TIGPS buyout and the SIPS buy-in, including management’s judgement not to

recognise potential refunds or residual assets at 31 July 2026 given the remaining uncertainty over recovery. It also considered the non-headline

settlement charge arising from the SIPS transaction and the proposed accounting for the write-off of the IAS 19 accounting surplus.

The Committee also considered KPMG’s updated risk assessment, including that the SIPS valuation is no longer expected to be a significant risk at year

end, but remains a key audit matter for the Parent Company in relation to the accounting for the transaction, recognition of any surplus and adequacy of

disclosures.

The Committee noted the position and agreed with management’s proposed approach.

Taxation

Smiths tax position includes judgements over

the effective tax rate, tax treatment of

completed disposals, deferred tax asset

recognition and open tax audit matters.

The Committee reviewed management’s assessment of the FY2026 effective tax rate, including the continuing operations headline ETR forecast and the

Group ETR including discontinued operations. It considered the key tax judgements, including the expected treatment of the Smiths Interconnect and

Smiths Detection disposals under Substantial Shareholdings Exemption, the approach to UK and US deferred tax assets and the transfer of certain

Detection Germany tax audit risks on completion.

The Committee also considered KPMG’s year-end audit work over uncertain tax positions, disposal-related tax judgements and tax exposures, including

management’s Substantial Shareholdings Exemption analyses for Smiths Interconnect and Smiths Detection, the treatment of relevant deferred tax assets

and transferred tax audit risks.

The Committee challenged the sensitivity of the tax position to final profit mix and Q4 performance and agreed with management’s proposed approach.

Smiths Group plc Annual Report FY2026

Overview

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Governance

Financial statements

71

AUDIT & RISK COMMITTEE REPORT

CONTINUED

Areas of focus

Actions taken

Provisioning

Smiths holds material provisions for John

Crane, Inc. asbestos litigation and Titeflex

CSST product claims. The valuation of these

provisions requires judgement over

assumptions, forecast periods and the level

of estimation uncertainty.

The Committee considered the continued appropriateness of Smiths provisioning judgements, including the latest position on asbestos litigation and

Titeflex CSST claims. It reviewed management’s assessment that there had been no changes to the underlying assumptions, model or data inputs for the

asbestos provision that would require reassessment at this stage.

The Committee also considered Bates White HY2026 and FY2026 asbestos expenditure forecast reports and continued to support a ten-year forecast

period on the basis that probable expenditure beyond ten years remained not reasonably estimable given uncertainty in the US asbestos litigation

environment.

The Committee noted KPMG’s year-end audit response, including inquiries of management and Bates White, review of the expert opinion, analytical

procedures, assessment of the relevant disclosures and substantive testing of the John Crane, Inc. asbestos litigation provision.

Headline profit

Smiths presents headline profit and

non-headline items, which require

adjustment to IFRS results. This remains a

material judgement in FY2026 given the scale

of strategic activity, pension settlement costs

and legacy litigation movements.

The Committee reviewed management’s application of Smiths accounting policy for non-headline items and challenged the classification of material items

between headline and non-headline performance. It noted that the overall quantum of FY2026 non-headline items is extensive, primarily due to completed

strategic transactions recognised within discontinued operations, and that continuing operations will also be affected by the retirement benefit scheme

settlement loss following SIPS executing an insurance buy-in policy for its remaining uninsured liabilities and movements in legacy litigation provisions.

The Committee considered the consistency of the proposed treatment with prior periods and with Smiths policy, including KPMG’s FY2025 observations on

the presentation of alternative performance measures and the importance of clear, consistent disclosure of headline and non-headline adjustments.

The Committee also considered the heightened risk of management override of controls in FY2026, reflecting the scale and complexity of the Smiths

strategic activity. It noted KPMG’s planned focus on journals, non-headline expenditure, significant estimates and judgements, and indicators of potential

management bias.

DRC Heat Transfer acquisition accounting

Flex-Tek completed the acquisition of DRC

Heat Transfer during FY2026. The purchase

price allocation includes identifiable

intangible assets and goodwill, requiring

judgement over valuation assumptions,

useful lives and alignment with Smiths

accounting policies.

The Committee reviewed management’s assessment of the DRC Heat Transfer acquisition accounting, including the preliminary valuation of customer

relationships, order backlog, brand and goodwill prepared with the support of external valuation specialists. It considered the key accounting policy

alignment matters, including revenue recognition and commodity hedging, and noted that no material issues had been identified.

The Committee also considered KPMG’s audit response, including inspection of the executed sale agreement, vouching of consideration, risk assessment

procedures over acquired net assets, use of valuation specialists and planned review of IFRS 3 disclosures.

The Committee noted the work undertaken and agreed with management’s proposed approach.

Goodwill impairment assessments

Smiths goodwill impairment assessment

focuses on the remaining John Crane and

Flex-Tek cash-generating units. The

recoverable amount is determined using

value in use calculations, which require

judgement over forecast cash flows, discount

rates and available headroom.

The Committee considered KPMG’s year-end audit work over goodwill impairment, including the assessment of impairment indicators, challenge of cash

flow forecasts, discount rates and sensitivity analysis, and the adequacy of related disclosures.

It noted that the year-end risk assessment reflected the completion or progression of the strategic transactions during FY2026 and now focused on the

remaining John Crane and Flex-Tek cash-generating units.

The Committee also considered management’s July update that higher discount rates had reduced headroom compared with FY2025, but that both John

Crane and Flex-Tek continued to show significant headroom under the current assumptions. The Committee also noted that, given the significant

headroom, impairment reviews of intangible assets would no longer be a key source of estimation uncertainty.

Following review and discussion, the Committee concurred with management’s assessment.

72

Smiths Group plc Annual Report FY2026

AUDIT & RISK COMMITTEE REPORT

CONTINUED

External audit

KPMG has served as the Company’s external auditor

since its appointment at the 2019 AGM. Michael Maloney

acted as the lead audit engagement partner until his

retirement following the FY2022 audit, after which Mike

Barradell assumed the role from FY2023. In line with

professional standards and KPMG’s internal partner

rotation policies, Mike’s tenure will be limited to five years.

As disclosed in the FY2025 Annual Report, the Committee

agreed to undertake an audit tender in 2027, aligned with

audit partner rotation and ahead of the 2029 regulatory

deadline. Acting on behalf of the Board, the Committee is

overseeing the assessment of participating firms and

final presentations from shortlisted candidates. It will

recommend its preferred firm to the Board, with any

appointment subject to shareholder approval at the 2027

AGM. The Committee will continue to oversee KPMG’s

independence, effectiveness, audit fees and any potential

conflicts throughout the process. The Company complied

with the relevant provisions of the Statutory Audit

Services Order throughout FY2026 and up to the date of

this report.

External audit plan and fees

The Committee reviewed and approved KPMG’s audit

plan and fees for FY2026, including the proposed scope,

areas of focus and materiality levels. The Committee

monitored audit progress throughout the year and

considered reports from KPMG on the execution and

findings of the audit.

Independence and objectivity

The Committee oversees policies designed to

safeguard the independence and objectivity of the

external auditor, including those governing the

provision of non-audit services and the employment of

former audit firm personnel.

The Committee received confirmation from KPMG that

it remained independent in accordance with applicable

professional and regulatory requirements. In addition,

the Committee considered the effectiveness of the audit

engagement partner and the wider audit team as part

of its annual assessment of external audit

effectiveness.

Non-audit services

The Committee’s policy permits the external auditor to

provide certain non-audit services where this is

consistent with regulatory requirements and does not

compromise independence or objectivity. Approval

authority for permissible non-audit services is delegated

to the Committee Chair and/or Chief Financial Officer

within defined limits, with all such services reported to

the Committee. The policy was reviewed during FY2026

and the Committee agreed that it remained appropriate

without amendment.

In FY2026 total fees for non-audit services comprise 13%

(FY2025: 10%) of audit fees. It should be noted that this

ratio excludes £3.1m (FY2025: £1.7m) of reporting

accountant services that were required to support the

Company’s legal and regulatory requirements associated

with the Smiths Detection divestment process. These

services supported the dual-track potential sale or

demerger and included work relating to the preparation

and audit of Historic Financial Information required to

maintain transaction readiness. The remaining non-audit

fees primarily related to audit-related assurance

services, including the review of the FY2026 half-year

results and limited assurance over Smiths Scope 1-3

greenhouse gas emissions and energy metrics.

During the year, the Committee reviewed KPMG’s

independence confirmations and approved all

permissible non-audit engagements in accordance with

policy. Smiths policy limits non-audit fees to no more than

20% of the average audit fees over the preceding three

years, except in exceptional circumstances. The

Committee was satisfied that the level of non-audit fees

reflected the one-off divestment-related assurance work

undertaken during the year and that KPMG’s objectivity

and independence were not compromised.

Effectiveness of the external audit

The Committee is responsible for assessing the

effectiveness of the external audit and the performance of

the external auditor. In reaching its conclusion, the

Committee considered the quality and effectiveness of

KPMG’s audit approach, the robustness of audit planning

and execution, the handling of significant accounting and

audit judgements, and the expertise, independence and

professional scepticism demonstrated by the audit team.

The Committee also considered the quality of reporting

and insights provided to the Committee, feedback from

management and the extent to which observations from

previous effectiveness reviews had been addressed.

Based on its assessment and regular engagement with

KPMG throughout the year, the Committee concluded

that the external audit remained effective and that KPMG

continued to provide an independent and objective audit.

Accordingly, the Committee recommended to the Board

that KPMG be reappointed as the Company’s auditor at

the 2026 AGM.

Risk management and internal control

The Board is responsible for maintaining effective risk

management and internal control systems, which

are designed to identify, assess, manage and monitor

risks to the achievement of Smiths strategic objectives.

The Executive Committee is responsible for

implementing and operating these systems across

the business. Further information on Smiths risk

management and internal control framework is provided

on pages 33 to 44.

Effectiveness of Smiths risk management and internal

controls

On behalf of the Board, the Committee monitored and

reviewed the effectiveness of the risk management and

internal control systems throughout FY2026. This was

supported by reports from management, risk owners

and the Internal Audit function.

The Committee received updates on Smiths principal and

emerging risks, together with deep-dive reviews from

management and risk owners on the effectiveness of

associated controls. This included a business-by-

business review of risk, with divisions periodically

presenting their risk processes and risk registers to the

Committee. During FY2026, the Committee received risk

updates from John Crane and Flex-Tek, reviewed Legal,

Ethics & Compliance risks on a six-monthly basis and

continued to oversee cyber risk through its annual

programme of work.

Managing our risks

Read more about risk

management and our

principal risks

Page

33

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

73

AUDIT & RISK COMMITTEE REPORT

CONTINUED

In carrying out its review, the Committee challenged

management on mitigating actions, residual risk

exposure and emerging risk trends. It also monitored

progress against the internal controls programme,

including the refinement of financial controls,

remediation of identified control deficiencies and the

strengthening of governance and assurance

arrangements across the business.

This work supported the continued enhancement of the

control environment, the refresh of Smiths principal

risk register and its readiness for the revised UK

Corporate Governance Code requirements. Following

its review, the Committee was satisfied that risk

management activities remained aligned with Smiths

strategic objectives, risk appetite and operating model,

and concluded that Smiths risk management and

internal control systems remained effective, with no

material failings or weaknesses identified during the

year.

Principal risks update

During FY2026, the Committee completed a year-end

reassessment of Smiths principal risks, reflecting

Smiths repositioning around John Crane and Flex-Tek

following the strategic actions to divest Smiths

Interconnect and Smiths Detection. The review, which

included consideration of the John Crane and Flex-Tek

divisional risk registers, confirmed that the existing

principal risk categories remain appropriate and that

no new principal risks are proposed.

The reassessment concluded that Smiths risk profile

has evolved as a focused, premium industrial

engineering company, with changes to the relative

significance and articulation of certain risks rather than

the creation of new categories. Updates were made to

reflect increased emphasis on geopolitical uncertainty,

tariffs, sanctions, trade restrictions, supply continuity,

cyber risk, digital capability, customer concentration

and the attraction and retention of specialist talent.

Strategic transformation remains a principal risk, with

its focus evolving towards growth post-transformation

and delivery of Smiths strategic priorities.

Following its review, the Committee concluded the

principal risks remained appropriate and reflective of

Smiths risk profile at the FY2026 year end. Further

information, and the consideration of principal risks

within the viability assessment is set out on pages 53

and 54.

Preparation for compliance with Provision 29

The Committee continued to oversee Smiths

preparations for Provision 29 of the 2024 UK Corporate

Governance Code, ahead of the Board’s first material

controls declaration in FY2027. This work was

progressed alongside the divestments of Smiths

Interconnect and Smiths Detection, as the business

reshaped its control and assurance framework around

a focused, premium industrial engineering company.

Management further developed the material controls

framework, focusing on the controls most critical to

Smiths principal risks, financial reporting and key

operational and compliance activities. The Committee

reviewed the approach across John Crane and

Flex-Tek, including testing, evidence quality and linkage

to divisional risk registers and management

certifications.

The FY2026 dry run confirmed that the framework

remains appropriate for Smiths revised risk profile and

operating model following the separations. It also

identified areas to strengthen consistency of execution,

evidence standards and assurance over remediation,

including actions arising from the Flex-Tek subsidiary

balance sheet review.

The Committee is satisfied with the progress made and

will continue to oversee testing, refinement and

remediation in FY2027, with particular focus on

evidencing control operation and aligning assurance

activity with Smiths principal risks.

Internal Audit

Internal Audit provides independent assurance on the

effectiveness of Smiths governance, risk management

and internal control framework. The function operates

independently of management activities, with the Head

of Internal Audit reporting functionally to the

Committee Chair and administratively to the Chief

Financial Officer. The Committee-approved Internal

Audit Charter provides unrestricted access to Smiths

records, personnel and operations, together with direct

access to the Committee and its Chair.

Throughout the year, the Committee received regular

updates on delivery of the FY2026 Internal Audit Plan,

including significant audit findings, high-priority control

enhancement opportunities, management remediation

actions and progress against agreed timelines. The

Committee also reviewed and approved the FY2027

Internal Audit Plan, including its scope, risk coverage,

resources and budget. Internal Audit reviews during the

year included assurance over financial controls, risk

management processes, cyber security, ethics and

compliance activities, operational controls and

strategic programmes. Particular attention was given

to assurance activities supporting the Flex-Tek division

and the material controls readiness work.

The Committee maintains regular engagement with the

Director of Internal Audit and monitors the

performance of the function through its audit outputs,

stakeholder feedback and key performance indicators.

As part of its annual effectiveness review, the

Committee considered feedback from Committee

members, management, the external auditor and

Internal Audit self-assessment activities. The review

confirmed that Internal Audit continues to provide

effective and independent assurance over Smiths key

risks and controls. Feedback highlighted the quality of

the team, the strength of stakeholder engagement and

the value of its insight and assurance activities.

The review also identified opportunities to further

enhance the function, including increasing the use of

technology, data analytics and AI, continuing to align

audit activity with Smiths evolving risk profile, and

adapting assurance coverage to support business

transformation and change. The Committee reviewed

the resulting action plan and was satisfied these

initiatives had been appropriately reflected in Internal

Audit’s future plans.

Going Concern and

Viability Statement

Page

53

74

Smiths Group plc Annual Report FY2026

AUDIT & RISK COMMITTEE REPORT

CONTINUED

Accordingly, the Committee concluded that Internal

Audit continued to provide high-quality independent

assurance and valuable insight into emerging risks,

control enhancements and governance improvements

across Smiths and remained effective throughout

FY2026.

Ethics and compliance

The Committee maintained oversight of Smiths Ethics

& Compliance programme throughout the year,

receiving updates on Speak Out reporting and

investigations, trade compliance, bribery, corruption

and fraud prevention, data management and protection

and modern slavery matters.

The Committee reviewed Speak Out trends and noted

continued employee engagement with the programme,

with reporting levels remaining above external

benchmarks, a reduction in anonymous reporting and

increased substantiation rates, which it views as

positive. It also monitored trade compliance

developments, including tariffs, sanctions and oversight

of agents’ and distributors’ commissions, and reviewed

progress in strengthening Smiths fraud prevention

framework in light of the Economic Crime and

Corporate Transparency Act (ECCTA) which came into

force in September 2025.

During the year, the Committee approved updates to

the Smiths Code of Business Ethics, including the

introduction of a dedicated anti-fraud section, and to

the Modern Slavery Statement, reflecting

enhancements to Smiths approach to responsible

sourcing and supply chain due diligence.

The Committee also received regular updates on

matters arising from the Flex-Tek review, including the

outcomes from cultural review work undertaken by

Ethics & Compliance. Based on the assurance received

during the year, the Committee concluded that Smiths

arrangements for promoting ethical behaviour and for

raising, investigating and addressing concerns

remained effective.

Further information on Smiths approach to ethics and

compliance is provided on page 28.

Assessment of internal control and risk

management arrangements

The Committee was satisfied that Smiths financial

reporting and control processes, culture, ethical

standards and stakeholder relationships remained

effective, and that its risk management arrangements,

internal control framework and three lines of defence

model remained appropriate and adequate.

Behaving ethically and

legally

Page

28

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

75

SEPARATION

OVERSIGHT

COMMITTEE

REPORT

During the year, the Committee focused on the principal

judgements needed to support the successful delivery

of both transactions. It provided disciplined oversight

and challenge across the strategic, financial and

execution considerations, helping to ensure that the

Board’s decisions were informed by a clear assessment

of value, deliverability, transaction certainty and the

wider market environment.

For Smiths Interconnect, the Committee reviewed the

divestment process, transaction structure, valuation,

market interest and principal execution risks. Following

detailed review and challenge, it supported the sale of

the business to Molex Electronic Technologies

Holdings, LLC, a Koch company, which was announced

in October 2025 for an enterprise value of £1.3bn. The

Committee continued to oversee execution planning

through to completion, which was announced on

31 March 2026.

For Smiths Detection, the Committee oversaw the

dual-track process, maintaining optionality between a

sale and a potential demerger until a preferred route

was identified. It assessed the relative merits of both

options, including shareholder feedback, value creation

opportunities, execution certainty, market conditions

and timing. Following a comprehensive assessment of

proposals and transaction terms, the Committee

concluded that the proposed sale of the business to

funds advised by CVC Capital Partners represented the

most attractive outcome for shareholders and

recommended the transaction to the Board. The

agreement was announced in December 2025 for an

enterprise value of £2.0bn. The Committee then

maintained oversight of the key completion

workstreams through to completion on 30 June 2026.

Chairman’s statement

I am pleased to present the Separation

Oversight Committee’s Report. The Committee

was established by the Board in January 2025

to oversee the strategic actions announced at

that time, comprising the launch of a sale

process for Smiths Interconnect and the

separation of Smiths Detection, either by way

of a UK demerger or sale.

Steve Williams

Chairman of the Separation

Oversight Committee

Committee membership

*

Steve Williams

Alister Cowan

Richard Howes

Simon Pryce

Top Committee activities

this year

–

Oversight of the Smiths

Interconnect divestment

process through to

announcement and

completion

–

Assessment of the

Smiths Detection

dual-track process and

preferred separation

route

–

Monitoring of

separation readiness,

completion planning

and capital allocation

considerations across

both transactions

Across both transactions, the Committee considered

the interests of employees, customers, suppliers and

other key stakeholders, with a focus on maintaining

continuity and confidence through divestment and

completion. It challenged management’s assumptions,

reviewed key risks and financial implications, and

monitored critical milestones before making

recommendations to the Board.

The successful completion of both divestments

delivered a combined enterprise value of £3.3bn and

contributed to the repositioning of Smiths as a focused,

premium industrial engineering company. The

Committee’s work also supported the Board’s

decisions on transaction execution, capital allocation

and the return of value to shareholders.

On behalf of the Committee, I would like to thank my

fellow Committee members, management and

advisers for their contribution.

Steve Williams

Chairman of the Separation Oversight Committee

Board activity and key

decisions

Page

61

76

Smiths Group plc Annual Report FY2026

REMUNERATION

& PEOPLE

COMMITTEE

REPORT

Business context

At the beginning of 2025, Smiths announced several

material strategic actions to unlock significant value

and enhance returns to shareholders, including the

separation of both Smiths Interconnect and Smiths

Detection. The Executive Directors and their senior

leadership team successfully delivered both planned

divestments during FY2026, ahead of the intended

schedule and for attractive enterprise valuations. This

has been accompanied by investment in organic growth

and value-accretive acquisitions.

Given the material nature of the strategic activity, and

mindful of the extensive leadership changes we have

experienced over the past three years, the Board

considers it imperative to retain and incentivise our

leadership team, that has delivered this value creation,

to successfully execute our plans, aligning them to the

delivery of further stakeholder value and providing

stability of leadership through the critical next phase of

Smiths journey.

AIP and LTIP outturns for FY2026

The Committee considered outcomes under the FY2026

AIP and the FY2024 LTIP awards in the context of the

significant value unlocked with the sale of Smiths

Interconnect and Smiths Detection, resilient revenue

growth in Smiths and continued operating profit margin

expansion towards our medium-term targets. Based

on performance during the year, a bonus of 59.9% of

maximum opportunity for FY2026 was awarded,

representing an achievement between target and

maximum against the financial and non-financial

metrics. One third of the bonus earned will be deferred

into shares for the Executive Directors. The FY2024

LTIP award vested at 95.7% of maximum, reflecting

performance over a three-year period aligned to the

sustainable growth of the business and value created

during that time.

In determining the final outcomes, the Committee

considered the proceeds of sale from the divestments,

inorganic revenue growth from acquisitions and the

impact on FY2026 AIP and FY2024 LTIP outturns.

The Committee agreed that the overall impact on

remuneration was fair and appropriate, and no

adjustments were required. No discretion was applied

to adjust the AIP or LTIP outturns.

Implementation for FY2027

Following the separation of Smiths Interconnect and

Smiths Detection during FY2026, the Committee

reviewed the CEO’s and CFO’s base salaries and total

compensation positioning to ensure that we continue to

incentivise exceptional shareholder value creation and

retain our executive team to deliver our ambitious

growth strategy. The Committee is also cognisant of

the evolving competitive landscape for UK listed

companies, particularly in light of the global talent

market we operate in, with one of our business divisions

located in the US, and over 60% of our revenues

sourced from the US market.

Base salary increases

When Roland Carter took over as CEO in March 2024,

bringing over 30 years of experience to the role, his

base salary was positioned just below the outgoing

CEO. His base salary has been increased in line with

the rate of increase for the wider workforce since his

appointment. FY2026 has been another year of strong

performance for the Company, as detailed in the

financial results. Considering this holistically and

recognising Roland’s strong performance in the role, as

well as positioning against relevant external

benchmarks, the Committee determined a salary

increase of 6.5% to be appropriate. This increase

positions his base salary just above median compared

with FTSE 100 companies of a similar market

capitalisation and high internationality (excluding

financial services companies). The Committee was also

mindful of the impact of a salary increase on total

compensation. This increase maintains total target

compensation between median and upper quartile

against this market capitalisation peer group, which the

Committee considers appropriate, reflecting the

Group’s ambitious growth strategy. We also carefully

Chair’s statement

I am pleased to present the

Remuneration Report for the

year to 31 July 2026, my first

since becoming Chair of the

Committee. I am delighted that

our Directors’ Remuneration

Report was supported by 96.27%

of shareholders at the November

2025 AGM.

A key role of the Committee is to provide

oversight of the implementation of the Smiths

people strategy. As such, at each meeting, the

Committee reviews elements of the strategy

to ensure it supports our business objectives

and desired culture. This includes particular

focus on motivation, retention and

engagement within the leadership team and

wider workforce, considering the extent of

business change delivered during the

financial year.

Alister Cowan

Chair of the Remuneration &

People Committee

Committee membership

Pam Cheng

Alister Cowan

Dame Ann Dowling

Steve Williams

Top Committee activities

this year

–

Considered remuneration

matters for Executive

Directors and the wider

workforce, aligned with

the company’s strategic

update during the year

–

Advised on incentive and

retention strategy for

key leadership through

significant business

change

–

Approved FY2027 salary

increases for the Board

& Executive Committee

considering performance

in role, external market

data and wider workforce

increases

–

Considered the evolution

of the Remuneration

Policy ahead of the 2027

policy review cycle

77

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

110,000 shares, aligning his award level with his

predecessor. The FY2027 LTIP award values for the

CEO and CFO are within the Policy headroom limit of

500% of salary.

No changes are proposed to the FY2027 LTIP award

measures, which comprise EPS (40%), relative TSR

(20%), revenue (20%) and free cash-flow (20%).

Chairman and Non-executive

Director fees

During the year, the Board and Committee reviewed

the fees payable to the Non-executive Directors and

Chairman, taking account of the scope, responsibilities

and global complexity of the roles, the growth

ambitions of the business, and evolving market practice

where there is an increasing focus on ensuring that

fees fairly reflect time commitments associated with

Non-executive Director roles and enable Boards to

attract high calibre talent with the required skillsets.

Reflecting the increasing demands on Non-executive

Directors as Smiths continues to deliver its strategic

agenda, the Chairman and Executive Directors

approved an increase in the Non-executive Director

base fee from £83,789 to £110,000 per annum, effective

from 1 July 2026. Additional fees for Committee Chairs

and the Senior Independent Director increased from

£20,000 to £25,000, representing the first increase in

ten years. At the same time, the Separation Oversight

Committee was disbanded and the associated fees

discontinued, simplifying the overall fee structure.

Following its review, the Committee approved an

increase in the Chairman’s fee from £497,845 to

£530,000 with effect from 1 October 2026, reflecting the

strategic input, responsibilities and demands of the

role. All fee changes were informed by market

benchmarking, investor guidance and the Investment

Association’s Principles of Remuneration.

Committee membership and meetings

The members of the Committee, their biographies

and attendance at meetings during the year can be

found on pages 57 to 59. The CEO and Chief People,

Sustainability & Excellence Officer usually attend

Committee meetings. Other members of senior

management are invited to attend as necessary.

The Director of Governance acts as secretary to

the Committee.

Committee performance review

In FY2026, the performance of the Committee was

considered as part of the wider Board review process

described on page 65. Overall, it was confirmed that the

Committee continues to operate effectively.

Looking forward

I hope you find this report a clear explanation of

the Committee’s considerations, decisions and

remuneration outcomes for FY2026. During the course

of FY2027, the Committee will be reviewing the

Remuneration Policy, aligned to our normal three-year

cycle. Any amendments we propose to the current

policy will be to ensure our remuneration framework

remains fit for purpose, aligned to our growth strategy

and continues to incentivise the senior leadership team

to deliver sustainable value creation. We look forward

to engaging with institutional shareholders and proxy

voting agencies to discuss any changes that we may

propose to our Remuneration Policy. I trust that we

will have your support for the FY2026 Directors’

Remuneration Report when voting at the AGM.

Alister Cowan

Chair of the Remuneration & People Committee

considered the increase against the backdrop of a wider

UK workforce average increase of 3.5% and are

comfortable that it is appropriate in light of the

performance delivered, the size and complexity of the

Company, our ambitious growth targets and the need to

maintain appropriate market positioning for this role.

The CFO’s base salary will be increased by 3.5% in line

with the wider UK workforce.

FY2027 AIP

In line with the Policy, the maximum AIP opportunity for

the CEO and CFO is 250% and 220% of salary,

respectively. Changes are proposed to the FY2027 AIP

measures to realign with business priorities. The

weightings of the revenue and operating profit

measures have each been increased by 10% compared

with FY2026 and operating profit margin has been

removed as a measure. The overall weighting of

financial and non-financial measures will remain at

80%/20%. The financial measures comprise revenue

(30%), operating profit (30%), and cash conversion

(20%). The non-financial measures continue to align to

business priorities and include a robust energy

reduction metric.

FY2027 LTIP

The Board operates a fixed number of shares approach

to granting LTIP awards which has been in place

through two Policy cycles and has delivered strong

alignment with the shareholder experience. The CEO

will be granted an FY2027 LTIP award over 190,000

shares (in line with FY2025 and FY2026 LTIP awards).

Following his appointment as CFO in February 2025,

Julian Fagge was granted an FY2026 award over

102,500 shares, which was at a lower level than his

predecessor (110,000 shares). The Committee has

reviewed Julian’s FY2027 LTIP award level in the

context of his strong performance in role and the

exceptional performance delivered by the business in

FY2026. The Committee has determined that it is

appropriate to increase Julian’s FY2027 LTIP award to

Implementation of

Remuneration Policy

in FY2026

Page

79

Statement of

implementation of

Remuneration Policy

in FY2027

Page

80

78

Smiths Group plc Annual Report FY2026

Roland Carter:

Julian Fagge:

£0

£500

£1,000

£1,500

£4,500

£5,000

£2,000

£2,500

£3,000

£3,500

£4,000

£5,500

£5,277

£3,054

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Base salary

Implementation of Remuneration Policy in FY2026

Single figure (£000)

(000)

Roland Carter

Julian Fagge

Salary

£996

£643

Pension and benefits

£162

£103

Annual bonus

£1,492

£848

Long-term incentives

£2,627

£1,460

Roland Carter received:

£996,450

Julian Fagge received:

£643,250

Pension and benefits

–

Pension contributions of 12% of base salary for Roland Carter and

Julian Fagge, in line with the rate available to the wider UK workforce.

–

Benefits included healthcare, insurances and car benefit.

Annual Incentive Plan (AIP)

Total bonus payout (% of maximum):

Roland Carter:

59.9%

Julian Fagge:

59.9%

Performance measure

Threshold

(25%

payout)

Outturn

Maximum

(full

payout)

Outturn

(% vesting)

Revenue (20%)

£2,926m

£2,950m

£3,141m

6.6%

Operating profit (20%)

£513m

£530m

£570m

9.0%

Headline operating cash conversion (20%)

H1 (10%)

80%

83%

95%

4.0%

FY (10%)

90%

96%

100%

6.0%

Operating profit margin (20%)

H1 (10%)

17.0%

17.2%

17.4%

6.3%

FY (10%)

17.5%

18.1%

10.0%

Strategic business measure

(20%)

n/a

18.0%

n/a

18.0%

Long-Term Incentive Plan (LTIP)

Total vesting (% of maximum):

Roland Carter:

95.7%

Julian Fagge:

95.7%

Performance measure

Threshold

(25%

payout)

Outturn

Maximum

(full

payout)

Outturn

(% vesting)

Revenue growth (30%)

3.5%

6.3%

6.5%

28.8%

Headline EPS growth after

tax (20%)

6.0%

10.0%

11.0%

16.9%

Free cash-flow (20%)

45%

56.0%

55%

20.0%

Average ROCE (15%)

14.0%

17.7%

17.0%

15.0%

Reduction in GHG

emissions (15%)

15.0%

28.0%

20%

15.0%

79

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Statement of implementation of Remuneration Policy in FY2027

Performance measures and link to strategy

Performance measure

Link to strategy

AIP

LTIP

Revenue/revenue growth

Operating profit

Headline EPS growth after tax

Headline operating cash conversion

Free cash-flow

Scorecard of strategic business measures including energy reduction

Relative total shareholder return

Base salary

Roland Carter:

£1,067,500

6.5% increase

Julian Fagge:

£669,600

3.5% increase

UK wider workforce increase of 3.5%.

Long-term incentive (LTIP)

Annual bonus (maximum opportunity)

Roland Carter:

190,000

shares

Julian Fagge:

110,000

shares

Performance measure

Weighting

Threshold

(25%

vesting)

Maximum

(full

vesting)

Revenue growth

20%

4%

8%

Relative TSR

20%

50%

75%

Headline EPS

growth after tax

40%

7%

12%

Average free

cash-flow

20%

45%

60%

–

Two-year post-vesting holding period applies

Roland Carter:

250%

of base salary

Julian Fagge:

220%

of base salary

Performance measure

Weighting

Revenue

30%

Operating profit

30%

Headline operating cash conversion

20%

Strategic business measure

20%

–

33% of annual bonus deferred into shares for

three years

–

Strategic business measure includes energy

reduction

–

Specific targets are considered to be

commercially sensitive and will be disclosed

retrospectively

Shareholding requirements

Pension Benefits

Executive Directors should build a

minimum shareholding equivalent

to the annual fixed number of

shares awarded under the LTIP

within five years and are required to

hold shares equivalent to their full

in-employment shareholding

guideline, or actual holding if lower,

for two years post-employment.

Roland Carter:

12%

of base salary

Broader benefits package

consists of healthcare,

insurances and car benefit

Julian Fagge:

12%

of base salary

Broader benefits package

consists of healthcare,

insurances and car benefit

Key

Accelerate

Innovate

Execute

Compound

80

Smiths Group plc Annual Report FY2026

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Consideration of wider workforce

The Committee considers all stakeholder groups when setting executive pay, including our people. The Committee is briefed on pay arrangements across the business

and receives reports on people priorities within each of the businesses. In addition, a summary of remuneration-related issues raised by employees through the employee

engagement survey is presented to the Committee. Our overarching reward philosophy applies to all employees; it is based on fairness and consistency, applying principles

of equity and transparency in pay structures. Whilst considering market competitiveness of base remuneration, the principles of pay for performance cascade to the wider

workforce, linking reward outcomes to both financial and non-financial performance measures. Details of workforce engagement by the Non-executive Directors over the

year can be found on page 59. The overall responsibility for workforce engagement sits with the Chair of the Committee.

Single figure of annual remuneration (audited)

Executive Directors

Salary

Benefits

Payments in lieu of

pension contribution

Total fixed

Annual bonus

Long-term incentives

Total

performance related

Total

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

Roland Carter

996

964

42

37

120

116

1,158

1,117

1,492

1,893

2,627

1,422

4,119

3,315

5,277

4,432

Julian Fagge

643

313

26

12

77

31

746

356

848

481

1,460

1,271

2,308

1,752

3,054

2,108

Salary

Roland Carter and Julian Fagge were in their respective roles throughout FY2026 and the figures in the table reflect the remuneration in respect of the full fiscal year. Julian

Fagge was appointed to the Board as CFO on 1 February 2025 and therefore the values in the single figure table above in respect of FY2025 represents the remuneration paid

from 1 February 2025. Salary increases approved in FY2025 were effective from 1 October 2025.

Benefits

Benefits for Executive Directors include life assurance, disability insurance, private healthcare insurance and car related benefits.

Pension

Executives may choose either to participate in the company’s defined contribution pension plan or to receive a pension allowance in lieu thereof. Roland Carter and

Julian Fagge received an allowance in lieu of pension contribution equivalent to 12% of salary. This is aligned to the rate available to the wider UK workforce.

81

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

FY2026 annual bonus outcome

The maximum annual bonus opportunity for FY2026 was 250% of salary for Roland

Carter. The maximum bonus opportunity for Julian Fagge was 220% of salary. For

FY2026, financial metrics made up 80% of the annual bonus, with the final 20% based

on performance against strategic business objectives, including energy reduction.

The table (below) summarises the financial targets and the company’s actual

performance (restated at budget exchange rates) against those for the FY2026

annual bonus.

Performance targets, actual performance and outturn

Measure

Weighting

Threshold

25% payout

Target

50% payout

Maximum

100% payout

Actual

Outturn

Revenue

20%

2,926m

2,998m

3,141m 2,950m

6.6%

Operating profit

20%

513m

535m

570m

530m

9.0%

Operating profit margin

H1

10%

17.0%

17.1%

17.4%

17.2%

6.3%

FY

10%

17.5%

17.8%

18.1%

10.0%

Headline operating cash conversion

H1

10%

80%

85%

95%

83%

4.0%

FY

10%

90%

95%

100%

96%

6.0%

Total financial

80%

41.9%

Strategic objectives

20%

18.0%

Total

100%

59.9%

The strategic objectives for the Executive Directors are based on achievements

against energy reduction targets, innovation priorities and the strategic separation

programme of Smiths Interconnect and Smiths Detection. The Group delivered

volume adjusted energy reduction of 2.8% in FY2026 against a threshold to maximum

bonus target range of 1% to 3%. The Group delivered innovation of 5.9% in FY2026,

within the threshold-to maximum bonus target range of 5.4% to 6.3%. This was

primarily the development and commercialisation of new products across all

divisions. The Smiths Interconnect and Smiths Detection transactions were

completed in March 2026 and June 2026, respectively, at a combined enterprise value

of £3.3bn, ahead of expectations in both timing and value realised.

The Committee determined a performance achievement at 90% for the strategic

objectives.

Overall FY2026 annual bonus outturn

The following table sets out the FY2026 bonus outturn for Executive Directors:

Maximum opportunity

(percentage of salary)

Outturn

(percentage of maximum)

Roland Carter

250%

59.9%

Julian Fagge

220%

59.9%

The Committee considered the overall outturn carefully in the context of the company

and individual performance and determined that the amounts were a fair reflection of

performance in the year. One third of the annual bonus will be deferred into Smiths

shares for three years.

82

Smiths Group plc Annual Report FY2026

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

FY2024 long-term incentive plan outcome

Roland Carter and Julian Fagge received an award under the FY2024 LTIP, subject to the following performance conditions:

Measure

Weighting

Performance period

Threshold 25%

Maximum 100%

Actual

Outturn (% of vesting)

Average revenue growth

30%

1 August 2023 to 31 July 2026

3.5%

6.5%

6.3%

28.8%

Average annual Group headline EPS growth after tax

20%

1 August 2023 to 31 July 2026

6.0%

11.0%

10.0%

16.9%

Average ROCE

15%

1 August 2023 to 31 July 2026

14.0%

17.0%

17.7%

15.0%

Free cash-flow

20%

1 August 2023 to 31 July 2026

45%

55%

56.0%

20.0%

Reduction in GHG emissions (from continuing operations)

15%

1 August 2023 to 31 July 2026

15%

20%

28.0%

15.0%

Total vesting

100%

95.7%

The Group headline EPS growth after tax performance has been calculated to exclude the impact of share buybacks funded from disposal proceeds in order to ensure the

targets were not materially easier to achieve than when originally set. The value in the single figure table has been calculated using an estimated share price, based on the

average price over the last three months of the financial year (£25.40). The share price appreciation attributable to the FY2024 LTIP for Roland Carter was 59.5% (£609,662)

and for Julian Fagge was 59.5% (£544,904). An additional holding period of two years will apply to the shares vesting.

The LTIP figures for FY2025 have been updated in the single figure table on page 81 to reflect the share price at the vesting date £24.05. The share price appreciation

attributable to the LTIP for Roland Carter was (42.6%) (£391,670) and for Julian Fagge was (42.6%) (£350,067). Total performance related pay and total pay have also been

restated accordingly.

Scheme interests awarded in FY2026 (audited)

Scheme

Form of award

Date of grant

Number of

shares awarded

Award price

Face value

(£000)

% vesting at threshold

performance

Performance

period end date

Roland Carter

LTIP

Conditional shares

14/10/25

190,000

£24.05

4,570

25%

31 July 2028

Roland Carter

Deferred bonus

Conditional shares

01/10/25

27,316

£23.29

636

N/A

Julian Fagge

LTIP

Conditional shares

14/10/25

102,500

£24.05

2,465

25%

31 July 2028

Julian Fagge

Deferred bonus

Conditional shares

01/10/25

6,933

£23.29

161

N/A

The performance measures for the FY2026 LTIP award are as follows:

Measure

Weighting

Threshold (25% vesting)

Maximum

Revenue growth (average annual)

20%

4%

8%

Relative TSR

20%

50%

75%

Headline EPS growth after tax (average annual)

40%

7%

12%

Free cash-flow (average annual)

20%

45%

60%

Total

100%

83

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Key

LTIP

The Smiths Group Long-

Term Incentive

Plan 2015 & 2024.

SAYE

The Smiths Group

Sharesave Scheme.

+

The vesting dates shown

in respect of awards

made under the LTIP are

subject to the relevant

performance test(s) being

passed.

++

The expiry dates

shown apply in normal

circumstances.

Performance tests

–

LTIP awards granted

between November

2022 and April 2025

have the following

performance tests – 20%

headline EPS growth;

15% ROCE; 20% free

cash-flow; 30% revenue

growth; 15% reduction

in GHG emissions

–

LTIP awards granted from

October 2025 have the

following performance

tests -20% revenue

growth; 20% relative

TSR; 40% headline EPS

growth;20% free cash-flow

–

Enhanced LTIP awards

based on relative TSR

compared to the FTSE

100 (excluding financial

services and investment

trusts) over the three

financial years beginning

FY2025. Threshold vesting

(25% of the award) for

performance at the 60th

percentile level, increasing

on a straight-line basis to

maximum vesting at the

90th percentile

–

No performance criteria

for the deferred bonus

awards or SAYE

Directors’ share options and long-term share plans (audited)

Director and Plan

Options and

awards held

on 31 July

2026

Options and

awards held

on 31 July

2025

Exercise

price

Grant

date

Vesting date+

Expiry

date++

Date vested

Number

Exercise

price

Market price

at date

of grant

Market

price at

date of

vesting

Roland Carter

LTIP

0

67,200

N/A

02/11/22

08/10/25

14/10/25

62,367

N/A

2,405p

67,200

N/A

01/11/23

15/10/26

40,900

N/A

08/04/24

15/10/26

190,000

N/A

14/11/24

15/10/27

190,000

0

N/A

14/10/25

15/10/28

Enhanced LTIP

26,877

N/A

17/04/25

15/10/27

Deferred bonus award

7,668

N/A

01/10/24

01/10/27

27,316

0

N/A

01/10/25

01/10/28

SAYE

725

1,278p

16/05/24

01/08/27

647

1,421p

20/05/25

01/08/28

Julian Fagge

LTIP

0

60,062

N/A

02/11/22

08/10/25

14/10/25

55,742

N/A

2,405p

60,062

N/A

01/11/23

15/10/26

60,062

N/A

01/11/24

15/10/27

21,219

N/A

08/04/25

15/10/27

102,500

0

N/A

14/10/25

15/10/28

Deferred bonus award

6,933

0

N/A

01/10/25

01/10/28

Enhanced LTIP

17,353

N/A

17/04/25

15/10/27

SAYE

1,346

1,337p

16/05/23

01/08/26

01/02/27

01/08/26

1,346

1,337p

1,671p

2,644p

888

0

2,048p

19/05/26

01/08/29

01/02/30

Notes

– The high and low market prices of the ordinary shares during the period 1 August 2025 to 31 July 2026 were 2,118p and 2,746p respectively. The mid-market closing price on 31 July 2025 was 2,351p and on 31 July

2026 was 2,644p.

– The five-day average closing price of a Smiths Group plc share on the dates of the LTIP awards made to Directors in the FY2026 financial year was 2,522p on 3 November 2025.

– The SAYE options granted to and held by Executive Directors at 31 July 2026 were granted at an exercise price below the market price of a Smiths Group plc share. The market price of a Smiths Group plc share

was 1,671p at 16 May 2023, 1,598p at 16 May 2025 and 2,560p at 19 May 2026. Shares are granted in May but the savings period commences in August.

– None of the options or awards listed above was subject to any payment on grant.

– No options or awards have been granted to or exercised by Directors or have lapsed during the period 1 August to 21 September 2026.

– At 31 July 2026, the trustee of the Employee Benefit Trust held 1,493,880 shares. The market value of the shares held by the trustee on 31 July 2026 was £39,495,199 and all dividends were waived in the year in

respect of the shares held by the trustee.

– Special provisions permit early exercise of options and vesting of awards in the event of retirement, redundancy or death.

84

Smiths Group plc Annual Report FY2026

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Payments to past Directors (audited)

Clare Scherrer’s share awards under the Company’s LTIP were preserved in

accordance with the good leaver provisions of the LTIP, subject to a time pro-rating

and performance adjustment and normal vesting dates. In respect of the FY2024

LTIP, 59,676 shares will vest at 95.7% of the pro-rated maximum which is 57,109

shares with a value of £1,450,569.

Payments for loss of office (audited)

There were no payments for loss of office in FY2026.

Share ownership requirement for Executive Directors

Executive Directors are required to build a minimum shareholding equivalent to the

annual fixed number of shares awarded under the LTIP within five years. Executive

Directors are required to retain at least 50% of any net vested share awards (after

sales to meet tax liabilities) until those guidelines are achieved. Shares under

deferred bonus awards and LTIP awards which have vested but are subject to a

further holding period (net of assumed income tax) count towards the requirement.

Awards that are still subject to performance conditions do not count towards

the requirement.

Executive Directors will be required to hold shares equivalent to their full in-

employment shareholding guideline, or actual holding if lower, for two years

post-employment, in line with best practice guidance. To help enforce this

requirement, a hold is put on vested shares held in broker accounts with Smiths

Group’s share plan administrator. This policy applies to Clare Scherrer who retired

from Smiths during FY2025. Ms Scherrer is required to hold 33,116 shares in the

Company until 30 April 2027.

Share scheme dilution limits

The Company complies with the guidelines laid down by the Investment Association.

These restrict the issue of new shares under all the Company’s share schemes in

any ten-year period to 10% of the issued ordinary share capital. As at 31 July 2026

the headroom available under this limit was 8.38%.

Executive Directors’ shareholdings (audited)

The table below shows the shareholding for each Executive Director against their respective shareholding requirement as at 31 July 2026.

Director

Shareholding

requirement

Shares owned

outright

Shares

subject to

performance

Vested

shares in

holding period

Shares

arising from

bonus deferral

Save As

You Earn

(SAYE)

Current

shareholding

(% of requirement)

1

Shareholding

requirement

met

Roland Carter

190,000

156,608

514,977

62,251

34,984

1,372

125%

Y

Julian Fagge

110,000

7,857

261,196

55,639

6,933

888

61%

N

Julian Fagge acquired 1,346 shares on 1 August 2026 following exercise of the Save As You Earn shares awarded on 16 May 2023. There have been no other changes to the

Executive Directors’ shareholdings between 1 August 2026 and 21 September 2026.

Footnotes

1

Shares owned outright

(including vested shares

in holding period), and

the net of income tax

value of shares arising

from bonus deferral, are

taken into account for the

shareholding requirement.

Executive Directors have

five years from the date

of appointment to meet

the required personal

shareholding. Roland

Carter has met the

requirement. Julian Fagge

has until 1 February 2030

to meet a shareholding

requirement of 102,500

and until 1 October 2031 to

meet the requirement of

110,000 shares.

85

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

TSR performance

The following graph shows the company’s total shareholder return (TSR) performance over the past ten years compared to the FTSE 100 Index. The FTSE 100 Index, of which

the company has been a member throughout the period, has been selected to reflect the TSR performance of other leading UK-listed companies. The values of hypothetical

£100 investments in the FTSE 100 Index and Smiths Group plc shares at 31 July 2026 were £233.96 and £281.00 respectively.

Total Shareholder Return

£80

£100

£120

£140

£160

£180

£200

£220

£240

£260

£280

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

£100

£136.90

£115.81

£146.98

£124.82

£146.67

£128.67

£133.78

£109.18

£152.31

£128.97

£143.54

£137.29

£165.95

£148.25

£180.52

£168.44

£190.99

£245.80

£281.00

£233.96

£100

Smiths

FTSE 100

Chief Executive’s remuneration for the last ten years

FY2026

R Carter

FY2025

R Carter

FY2024

R Carter

FY2024

P Keel

FY2023

P Keel

FY2022

P Keel

FY2021

P Keel

FY2021

A Reynolds

Smith

FY2020

A Reynolds

Smith

FY2019

A Reynolds

Smith

FY2018

A Reynolds

Smith

FY2017

A Reynolds

Smith

Total remuneration £000

5,277

4,432

1,656

814

4,285

1,832

450

2,753

2,196

4,130

3,251

2,320

Annual bonus outcome (% max)

59.9%

85.4%

60.5%

0%

70%

39%

76%

70%

17%

41%

42%

96%

LTIP outcome (% max)

95.7%

88.0%

76.7%

0%

76%

n/a

19%

31%

75%

32%

n/a

86

Smiths Group plc Annual Report FY2026

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Chief Executive pay ratios

These ratios set out the comparison between the Chief Executive’s remuneration and

that for employees in the UK workforce.

Total remuneration

Year

Method

25th percentile

ratio

Median pay

ratio

75th percentile

ratio

FY2026

Option B

122:1

87:1

57:1

FY2025

Option B

108:1

82:1

53:1

FY2024

Option B

69:1

46:1

30:1

FY2023

Option B

128:1

92:1

62:1

FY2022

Option B

58:1

39:1

26:1

Salary

Year

Method

25th percentile

ratio

Median pay

ratio

75th percentile

ratio

FY2026

Option B

25:1

18:1

13:1

FY2025

Option B

26:1

18:1

12:1

FY2024

Option B

27:1

19:1

13:1

FY2023

Option B

27:1

19:1

13:1

FY2022

Option B

28:1

20:1

13:1

Salary

(£ 000)

Total

remuneration

(£ 000)

Chief Executive

996

5,277

25th percentile employee

39

43

Median employee

56

61

75th percentile employee

79

93

The pay data for employees in the UK workforce has been calculated using Option B,

based on the data used for gender pay reporting, due to the availability of data at the

time the Annual Report was published. The gender pay reporting basis comprises

salary and benefits as at 15 April 2026 and incentive payments payable in respect of

FY2026. The Committee considers that this provides an outcome that is representative

of the employees at these pay levels. It is assumed that the value of employee

benefits is 7.0% of base salary as an average across the workforce.

The workforce remuneration figures are those paid to UK employees whose pay

is at the 25th, median and 75th percentile of pay for the Group’s UK employees.

Figures are shown on both the prescribed basis using total pay and also salary only,

which provides a useful ongoing comparison as it is a less volatile basis. The CEO pay

ratio for salary has remained relatively consistent for several years now. The ratio

has increased for total remuneration as the long-term incentive plan has vested near

to maximum this year.

Relative importance of spend on pay

The table below shows shareholder distributions (i.e., dividends and share

buybacks) and total employee pay expenditure for FY2026 and FY2025 and the

percentage change. The distributions are higher for FY2026 owing to a higher

number of share buybacks than FY2025.

FY2026

£m

FY2025

£m

Change

Shareholder distributions

988

455

117%

Employee costs

969

1,027

-5.6%

Executive Directors’ service contracts

The Company’s policy is that Executive Directors are normally employed on

terms which include a one-year rolling period of notice from the Company and six

months’ notice from the individual. The contract includes provision for the payment

of a predetermined sum in the event of termination of employment in certain

circumstances (but excluding circumstances where the Company is entitled to

dismiss without compensation). In addition to payment of basic salary, pension

allowance and benefits in respect of the unexpired portion of the one-year notice

period and for good leavers only, the predetermined sum would include annual

bonus and share awards only in respect of the period they have served, payable

following the end of the relevant performance period and subject to the normal

performance conditions.

Roland Carter is employed under a service contract with the Company dated and

effective from 25 March 2024. He became an Executive Director with effect from

25 March 2024. Julian Fagge is employed under a service contract with the Company

dated and effective from 1 February 2025. He became an Executive Director with

effect from 1 February 2025.

The Company may elect to terminate the contract by making a payment in lieu of

notice equal to the Director’s base salary and benefits (including pension allowance)

in respect of any unserved period of notice. The service contracts contain specific

provisions enabling a reduction in any phased payments in lieu of notice, in the event

that the Director finds alternative employment during the notice period. The service

contracts are available for viewing at the Company’s Registered Office.

87

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Malus and clawback provisions

The Remuneration & People Committee has discretion to apply malus and/or

clawback to awards granted under the company’s Annual Incentive Plan (AIP)

and Long-Term Incentive Plan (LTIP). Malus may be applied before awards are

paid or vested and clawback may be applied following payment or vesting.

The Committee may apply malus and/or clawback in a range of exceptional

circumstances including a material misstatement of the Group’s financial results,

misconduct, material breach of company policies or fiduciary duties, significant

failure of risk management, corporate failure, or actions resulting in serious

reputational damage to the Group. In determining whether to exercise these powers,

the Committee will consider the relevant individual’s degree of responsibility, the

impact of the event on the company and any remedial actions taken. For the AIP,

annual bonus payments are subject to clawback and deferred share awards are

subject to malus for a period of three years from the end of the relevant performance

year. LTIP awards are subject to malus throughout the vesting period and to

clawback from vesting until the fifth anniversary of grant. The Committee considers

these periods to be appropriate as they align the operation of malus and clawback

with the performance, vesting and holding periods of the Company’s incentive

arrangements and provide an appropriate timeframe for the identification and

assessment of matters that may warrant recovery.

These provisions continue to apply after an individual’s cessation of employment

where appropriate. Where malus or clawback is applied, the Committee may reduce

or cancel unpaid incentive awards, lapse unvested awards, reduce future incentive

awards or, where appropriate, require the repayment of cash or shares previously

delivered. Any recovery will be proportionate to the circumstances of the case and

will not exceed the net value received by the individual. The Committee reviews

annually whether any circumstances have arisen that would warrant the operation of

malus or clawback and will disclose any material use of these provisions in

accordance with the UK Corporate Governance Code. The Committee reviewed the

operation of the malus and clawback provisions during FY2026 and concluded that no

circumstances arose which required their application.

Non-executive Directors

Share ownership guidance for Non-executive Directors

Non-executive Directors are encouraged to acquire shares in the company with a

value of one times the annual base fee, over a five-year period. The five-year period is

from the later of 1 August 2021 or the date of appointment to the Board. In addition,

the Non-executive Directors are encouraged to retain a shareholding of one times

the annual base fee for at least two years after the Director leaves the Board.

Single figure of annual remuneration (audited)

Salary/fees

Benefits

1

Total

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

FY2026

£000

FY2025

£000

Steve Williams

2

495

479

4

–

499

479

Pam Cheng

102

97

-

–

102

97

Alister Cowan

3

138

111

4

–

142

111

Dame Ann Dowling

4

110

101

-

3

110

104

Karin Hoeing

5

31

101

-

1

31

102

Richard Howes

6

128

111

-

2

128

113

Simon Pryce

7

108

50

-

2

108

52

Mark Seligman

8

37

107

-

1

37

108

Noel Tata

37

101

5

–

42

101

Non-executive Director fees

Non-executive Director fees paid during FY2026 and payable during FY2027 are

shown below.

The Chairman and Executive Directors approved an increase in the Non-executive

Director base fee from £83,789 to £110,000 per annum, effective from 1 July 2026.

The increase reflects the materially greater time commitment required of Non-

executive Directors as a result of the evolving complexity of Smiths strategic agenda.

Additional fees for Committee Chairs and the Senior Independent Director increased

from £20,000 to £25,000, representing the first increase in ten years. At the same

time, the Separation Oversight Committee was disbanded and the associated fees

discontinued, simplifying the overall fee structure. These changes ensure that fee

levels remain competitive and appropriately reflect the time commitment, experience

and skills required of the role.

The Committee approved an increase in the Chairman’s fee from £497,845 to

£530,000 with effect from 1 October 2026, reflecting the strategic input,

responsibilities and demands of the role. All fee changes were informed by market

benchmarking, investor guidance and the Investment Association’s Principles of

Remuneration.

FY2027

FY2026

Fee payable to Chairman of the Board for all responsibilities

£530,000

£497,845

Non-executive Director base fee

£110,000

£83,789

Additional fee payable to the Senior Independent Director

£25,000

£20,000

Additional fee for Committee Chairs

£25,000

£20,000

Additional fee payable to members of the Separation Oversight Committee

n/a

£20,000

Attendance allowance for each meeting outside the Non-executive

Director’s home continent

£4,000

Footnotes

1

Benefits for the Chairman

and Non-executive

Directors may relate to

taxable travel-related

expenses reimbursed by

the company, grossed up

for UK income tax and

National Insurance (where

appropriate). Benefits may

also include UK tax return

support where applicable.

2

Steve Williams’ fee

is in respect of all

responsibilities as

Chairman.

3

Alister Cowan’s fees

include the fee for

membership of the

Separation Oversight

Committee and the fee for

chairing the Remuneration

& People Committee from

19 November 2025.

4

Dame Ann Dowling’s fees

include the additional fees

as Senior Independent

Director from 19 November

2025 and as Chair of the

Innovation, Sustainability

and Excellence Committee,

until the Committee was

retired.

5

Karin Hoeing’s fees include

the fee for chairing the

Remuneration & People

Committee, pro-rated to

retirement date.

6

Richard Howes’ fees

include the fees for

chairing the Audit &

Risk Committee and

his membership of the

Separation Oversight

Committee.

7

Simon Pryce’s fees include

the fee for membership of

the Separation Oversight

Committee.

8

Mark Seligman’s fees

include the fees as Senior

Independent Director and

for his membership of

the Separation Oversight

Committee pro-rated to

retirement date.

88

Smiths Group plc Annual Report FY2026

REMUNERATION & PEOPLE COMMITTEE REPORT

CONTINUED

Non-executive Directors’ shareholdings (audited)

The table below shows the shareholding for each Non-executive Director.

31 July 2026

Steve Williams

34,000

Pam Cheng

6,000

Alister Cowan

18,000

Dame Ann Dowling

5,813

Richard Howes

4,421

Simon Pryce

274

Following a quarterly acquisition of ordinary shares, under a share purchase

agreement using a fixed proportion of their after-tax fees received from the company,

Simon Pryce and Richard Howes acquired 195 and 67 shares respectively, on

1 August 2026. There have been no further changes between 1 August 2026 and 21

September 2026.

Chairman’s and Non-executive Directors’ letters of appointment

The Chairman and the Non-executive Directors serve the Company under letters of

appointment and do not have contracts of service or contracts for services. Except

where appointed at a General Meeting, Directors stand for election by shareholders

at the first AGM following appointment. The Board has resolved that all Directors

who are willing to continue in office will stand for re-election by the shareholders

each year at the AGM. Either party can terminate the appointment on one month’s

written notice and no compensation is payable in the event of an appointment being

terminated early. The letters of appointment or other applicable agreements are

available for viewing at the Company’s Registered Office.

Date of appointment

Steve Williams

1 September 2023

Pam Cheng

1 March 2020

Alister Cowan

1 July 2024

Dame Ann Dowling

19 September 2018

Richard Howes

1 September 2022

Simon Pryce

1 February 2025

Statement of shareholder voting

The table below sets out the voting outcome of the advisory resolution for approval of

the Directors’ Remuneration Report at the 2025 AGM and the approval of the

Directors’ Remuneration Policy at the 2024 AGM:

Resolution

Votes for

% of votes

cast for

Votes

against

% of votes

cast

against

Total

votes cast

Votes

withheld

(abstentions)

Directors’

Remuneration Report

230,973,139

96.27

8,959,508

3.73 239,932,647

87,311

Directors’

Remuneration Policy

237,176,139

92.30

19,849,822

7.70

257,025,961

2,196,034

Advisers to the Committee

During the year, the Committee received material assistance and advice from

the CEO, the Chief People, Sustainability & Excellence Officer, the Global Reward

Director, Deloitte LLP and Freshfields LLP. The Committee’s appointed independent

remuneration adviser is Deloitte LLP. The Director of Governance is secretary to

the Committee. A copy of the approved Directors’ Remuneration Policy can be found

on the company’s website.

The Company paid a total fee of £87,250 to Deloitte LLP in relation to remuneration

advice to the Committee during the year. Fees were determined on the basis of time

and expenses. During FY2026, Deloitte LLP provided the Committee with information

on the external remuneration market, compliance support for this year’s Directors’

Remuneration Report and the provision of other advice relating to remuneration

governance and market practice. Deloitte LLP is a founding member of the

Remuneration Consultants Group and a signatory to its Code of Conduct. Deloitte

LLP provided additional tax advisory services including global corporation tax

compliance and employee mobility advice, as well as company secretarial, internal

audit co-source, transaction and consultancy services.

The Committee is satisfied that the advice provided by Deloitte LLP is objective and

independent and that it does not have connections with the company that may impair

its independence.

The Directors’ Remuneration Report has been approved by the Board and signed on

its behalf by:

Alister Cowan

Chair of the Remuneration & People Committee

89

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

Other information that is relevant to the Directors’ report, and which is also incorporated by reference, can be

found as follows:

Disclosure

Location

Likely future developments in the Company

Strategic report pages 2 to 20

Directors’ dividend recommendation

Strategic report page 13

Research and development activities

Strategic report pages 15 to 18

Employment of disabled persons

Talent page 27

Engagement with UK employees

Building our culture page 22

Section 172 Statement and stakeholder engagement pages

63 and 64

Engagement with suppliers, customers and others in a

business relationship with the Company

Board activity and key decisions pages 61 and 62

Section 172 Statement and stakeholder engagement pages

63 and 64

Political donations and expenditure

Directors’ report page 91

GHG emissions, energy consumption and energy

efficiency

Task Force on Climate-related Financial Disclosures pages

31 and 47 to 52

Corporate Governance Statement

Governance report pages 55 to 65

Directors during FY2026

Governance report pages 57 to 58

Director appointment

Governance report page 66

Amendment of Articles of Association

Governance report page 67

Indemnities

Governance report page 60

Change of control

Borrowings and net debt note 18

Directors’ responsibility statement

Statement of Directors’ responsibilities page 92

Disclosure of information to the auditor

Statement of Directors’ responsibilities page 92

Financial instruments

Financial risk management note 19

Share capital disclosures

Share capital note 24

Acquisition of own shares (share buyback programme)

Share capital note 24

Directors’ powers

Governance report page 56

Share capital note 24

Post balance sheet event

Post balance sheet event note 31

Overseas branches

Subsidiary undertakings page 181

The Strategic report is a requirement of the

Companies Act 2006 (the Act) and can be

found on pages 2 to 54. The Company has

chosen, in accordance with section 414C(11) of

the Act, to include certain matters in its

Strategic report that would otherwise be

disclosed in this Directors’ report. The

Strategic report and the Directors’ report

together are the management report for the

purposes of Rules 4.1.8R to 4.1.12R of the

Disclosure Guidance and Transparency Rules.

DIRECTORS’

REPORT

90

Smiths Group plc Annual Report FY2026

Listing Rules disclosure

Information required by the FCA’s Listing Rules can be found as set out below. There are no further disclosures required in accordance with Listing Rule 6.6.1R.

Listing Rule

Disclosure

Location

6.6.1R(1)

Capitalised interest

There was no interest capitalised during FY2026

6.6.1(R)(4)(5)

Director emoluments

Remuneration & People Committee report page 77

6.6.1R(11)(12)

Dividend waiver

Dividend note 25

6.6.6R(1)

Directors’ interests

Remuneration & People Committee report pages 85 and 89

6.6.6R(2)

Major shareholders’ interests

Directors' report page 91

6.6.6R(3)

Going Concern and Viability Statement

Strategic report pages 53 and 54

6.6.6R(4)(a)

Purchase of own shares

Share capital note 24

6.6.6R(5)(6)

UK Corporate Governance Code compliance

Governance report page 55

6.6.6R(7)

Unexpired term of service contract

Remuneration & People Committee report page 88

6.6.6R(8)

TCFD disclosures

Task Force on Climate-related Financial Disclosures pages 47 to 52

6.6.6R(9)(10)(11)

Board and executive management diversity

Governance report page 68

Political donations

Smiths did not give any money for political purposes in the UK, the EU or outside of the EU, nor did it make any political donations to political parties or other political

organisations, or to any independent election candidates, or incur any political expenditure during the year. In accordance with the US Federal Election Campaign Act, Smiths

provides administrative support to a federal Political Action Committee (PAC) in the US funded by the voluntary political contributions of eligible employees. The PAC is not

controlled by the Company and all decisions regarding the amounts and recipients of contributions are directed by a steering committee comprising Government Relations

employees. Contributions to political organisations reported by the PAC during FY2026 totalled US$3,000 (FY2025: US$61,500). Contributions to charitable organisations

reported by the PAC during FY2026 totalled US$48,098.46.

The PAC was closed effective 20 August 2026.

Major shareholders’ interests

As at 31 July 2026, the Company had been notified under the FCA’s Disclosure Guidance & Transparency Rules of the following holdings of voting rights:

Number of voting rights

% of total voting rights

Date of notification

Blackrock, Inc.

35.5m

11.8

17 July 2026

Wellington Management LLP

16.0m

5.3

14 May 2026

Harris Associates L.P

19.7m

5.0

22 July 2019

Dodge & Cox

19.2m

5.0

12 March 2022

Ameriprise Financial, Inc.

17.7m

5.0

5 December 2022

Artemis Investment Management LLP

17.6m

4.9

25 October 2022

The following notifications were received between 1 August and 9 September 2026:

Number of voting rights

% of total voting rights

Date of notification

BlackRock, Inc.

37.7m

13.0%

7 September 2026

Wellington Management LLP

14.6m

5.07%

1 September 2026

By order of the Board

James Down

Company Secretary

21 September 2026

DIRECTORS’ REPORT

CONTINUED

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

91

–

Assess the Group and Parent Company’s ability to

continue as a going concern, disclosing, as applicable,

matters related to going concern; and

–

Use the going concern basis of accounting unless

they either intend to liquidate the Group or the Parent

Company or to cease operations, or have no realistic

alternative but to do so.

The Directors are responsible for keeping adequate

accounting records that are sufficient to show and

explain the Parent Company’s transactions and disclose

with reasonable accuracy at any time the financial

position of the Parent Company and enable them to

ensure that its financial statements comply with the Act

and, as regards the Group financial statements, Article 4

of the IAS Regulation. The Directors are also

responsible for such internal control as they determine

is necessary to enable the preparation of financial

statements that are free from material misstatement,

whether due to fraud or error and have a general

responsibility for taking such steps as are reasonably

open to them to safeguard the assets of the Group and

to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and

integrity of the corporate governance and financial

information included on the Company’s website.

Legislation in the United Kingdom governing the

preparation and dissemination of the financial

statements may differ from legislation in other

jurisdictions.

In accordance with Disclosure Guidance and

Transparency Rule (‘DTR’) 4.1.16R, the financial

statements will form part of the annual financial report

prepared under DTR 4.1.17R and 4.1.18R. The auditor’s

report on these financial statements provides no

assurance over whether the annual financial report has

been prepared in accordance with those requirements.

The Directors are responsible for preparing the Annual

Report, including a Strategic Report, Directors’ Report,

Directors’ Remuneration Report and Corporate

Governance Statement, and the Group and Parent

Company financial statements in accordance with

applicable law and regulations.

Company law requires the Directors to prepare Group

and Parent Company financial statements for each

financial year. Under that law the Directors have elected

to prepare the Group financial statements in accordance

with UK-adopted international accounting standards

and applicable law and have elected to prepare the

Parent Company financial statements in accordance

with UK accounting standards and applicable law,

including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the

financial statements unless they are satisfied that they

give a true and fair view of the state of affairs of the

Group and Parent Company and of the Group’s profit or

loss for that period. In preparing each of the Group and

Parent Company financial statements, the Directors are

required to:

–

Select suitable accounting policies and then apply

them consistently;

–

For the Group financial statements, make judgements

and estimates that are reasonable, relevant, and

reliable;

–

For the Parent Company financial statements, make

judgements and estimates that are reasonable,

relevant, reliable and prudent;

–

For the Group financial statements, state whether

applicable UK-adopted international accounting

standards have been followed;

–

For the Parent Company financial statements, state

whether applicable United Kingdom Accounting

Standards have been followed subject to any material

departures disclosed and explained in the Parent

Company financial statements;

Directors’ responsibility statement

Each of the Directors (who are listed on pages 57 to 58)

confirms that to the best of his or her knowledge:

–

The financial statements, which have been prepared

in accordance with the applicable set of accounting

standards, give a true and fair view of the assets,

liabilities, financial position and profit or loss of

the Company and the undertakings included in the

consolidation taken as a whole;

–

The Strategic Report and Directors’ Report, together

the management report, includes a fair review of the

development and performance of the business and

the position of the Company and the undertakings

included in the consolidation taken as a whole,

together with a description of the principal risks and

uncertainties that they face; and

–

As at the date of this Annual Report and financial

statements, there is no relevant audit information

of which the Company’s auditor is unaware. Each

Director has taken all the steps he or she should

have taken as a Director in order to make himself or

herself aware of any relevant audit information and to

establish that the Company’s auditor is aware of that

information.

We consider the Annual Report and financial

statements, taken as a whole, is fair, balanced and

understandable and provides the information necessary

for shareholders to assess the Group’s position and

performance, business model and strategy.

Signed on behalf of the Board of Directors:

Roland Carter

Chief Executive Officer

21 September 2026

Board biographies

Page

57

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT

OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

92

Smiths Group plc Annual Report FY2026

To the members of Smiths Group plc

1. Our opinion is unmodified

In our opinion:

–

the financial statements of Smiths Group plc give a true and fair view of the state of the Group’s and of

the Parent Company’s affairs as at 31 July 2026, and of the Group’s profit for the year then ended;

–

the Group financial statements have been properly prepared in accordance with UK-adopted

international accounting standards;

–

the Parent Company financial statements have been properly prepared in accordance with UK

accounting standards, including FRS 101 Reduced Disclosure Framework; and

–

the Group and Parent Company financial statements have been prepared in accordance with the

requirements of the Companies Act 2006.

What our opinion covers

We have audited the Group and Parent Company financial statements of Smiths Group plc (“the Company”)

for the year ended 31 July 2026 (FY2026) included in the Annual Report and Accounts, which comprise:

Group

Parent Company (Smiths Group plc)

Consolidated income statement, consolidated

statement of comprehensive income,

consolidated balance sheet, consolidated

statement of changes in equity, and

consolidated cash-flow statement.

Company balance sheet and company statement of

changes in equity.

Notes 1 to 32 to the Group financial statements,

including the accounting policies.

Notes 1 to 13 to the Parent Company financial

statements, including the accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and

applicable law. Our responsibilities are described below.

We believe that the audit evidence we have obtained

is a sufficient and appropriate basis for our opinion. Our audit opinion and matters included in this report are

consistent with those discussed and included in our reporting to the Audit & Risk Committee (“ARC”).

We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance

with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.

Independent auditor’s report

93

Consolidated primary statements

107

Consolidated income statement

107

Consolidated statement of

comprehensive income

108

Consolidated balance sheet

109

Consolidated statement of changes

in equity

110

Consolidated cash-flow statement

111

Accounting policies

112

Notes to the accounts

120

1.

Segment information

120

2.

Operating costs

123

3.

Non-statutory profit measures

124

4.

Net finance costs

126

5.

Earnings per share

127

6. Taxation

127

7. Employees

130

8.

Retirement benefits

130

9.

Employee share schemes

136

10. Intangible assets

137

11. Impairment testing

138

12. Property, plant and equipment

140

13. Right of use assets

140

14. Financial assets – other investments

141

15. Inventories

141

16. Trade and other receivables

141

17. Trade and other payables

142

18.

Borrowings and net cash/(debt)

143

19. Financial risk management

144

20. Derivative financial instruments

151

21. Fair value of financial instruments

153

22. Commitments

154

23. Provisions and contingent liabilities

154

24. Share capital

157

25. Dividends

158

26. Reserves

158

27. Acquisitions

159

28.

Discontinued operations and

businesses held for sale

160

29. Cash-flow

162

30.

Alternative performance measures and

key performance indicators

163

31. Post balance sheet events

166

32. Audit exemption taken for subsidiaries

166

Unaudited Group financial record

2022–2026

167

Unaudited US dollar primary statements

168

Smiths Group plc Company accounts

173

Company balance sheet

173

Company statement of changes in equity

174

Company accounting policies

175

Notes to the Company accounts

177

Subsidiary undertakings

181

FINANCIAL

STATEMENTS

KPMG LLP’S INDEPENDENT

AUDITOR’S REPORT

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

93

KPMG LLP’S INDEPENDENT AUDITOR’S REPORT

CONTINUED

2. Overview of our audit

Factors driving our view

of risks

Following our FY2025 audit, and considering developments affecting the Group since then, we have updated

our risk assessment decisions.

The Group recognises a provision of £153m (FY2025: £191m) arising from ongoing asbestos litigation claims in

John Crane, Inc. (“JCI”). There are significant judgements and estimates involved in the assumptions

underlying this provision, including the period over which potential claims are projected to be made, the

forecast number of future claims, and associated claim defence costs and complex estimation methodology.

Consistent with FY2025, there is significant auditor judgement involved in evaluating the assumptions, and our

assessment of the risk associated with this as a key audit matter remained consistent with prior year.

In FY2026, the Group recognised a gain on disposal of £1,690m arising from the sale of the Smiths Detection

and Smiths Interconnect divisions. This is considered a significant area of audit focus due to magnitude and

the strategic nature of the transactions. This matter had a significant effect on our audit strategy and

allocation of resources due to the audit effort required to assess the accounting, including whether the

transactions were recognised in the appropriate accounting period, and related disclosures.

In the prior year, the valuation of the SIPS defined benefit pension liabilities was identified as a key audit matter

for the Parent Company due to the significant estimation uncertainty involved. Following the execution of the

SIPS buy-in insurance policy during FY2026, the risks and estimation uncertainty associated with the

Company’s defined pension position reduced significantly. Consequently, the prior-year key audit matter is no

longer considered to be one of the matters of most significance in the current year’s audit. Instead, our focus

was on the accounting for the buy-in transaction, the allocation of a portion of any surplus remaining to

enhance member benefits after the cost of buy-out and winding-up the scheme have been met and de-

recognition of the residual surplus.

In the prior year, the recoverability of goodwill for the Smiths Detection business was reported as a key audit

matter for the Group. Following the sale of Smiths Detection during FY2026, assessment of recoverability of

the related goodwill is no longer relevant and has therefore been removed as a key audit matter.

Key audit matters

vs FY2025 Item

Estimation of litigation provisions for asbestos in

John Crane, Inc.

(a)

4.1

Accounting for the sale of Smiths Detection and

Smiths Interconnect and related disclosures

(a)

4.2

Accounting for the SIPS pension buy-in and

recoverability of the related pension surplus

(b)

4.3

(a) Key audit matter to the Group financial statements

(b) Key audit matter to the Parent Company financial statements

Audit & Risk Committee

Interaction

During the year, the ARC met 6 times. KPMG is invited to attend all ARC meetings and is provided with an opportunity to meet with the ARC in private sessions without the Executive

Directors being present. For each key audit matter, we have set out communications with the ARC in section 4, including matters that required particular judgement for each.

The matters included in the ARC Chair’s report on pages 69 to 75 are materially consistent with our observations of those meetings.

Our Independence

We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance

with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.

We have not performed any non-audit services during FY2026 or subsequently which are prohibited by the

FRC Ethical Standard.

We were first appointed as auditor by the shareholders for the year ended 31 July 2020. The period of total

uninterrupted engagement is for the 7 financial years ended 31 July 2026.

The Group engagement partner is required to rotate every 5 years. As these are the fourth set of the Group’s

financial statements signed by Mike Barradell, he will be required to rotate off after the FY2027 audit.

The average tenure of component engagement partners as set out in section 7 below is 3 years, with the

shortest being 1 and the longest being 5.

1

Audit related assurance services includes £0.4M (FY2025: £0.4M) for review of interim report and £3.1M (FY2025:

£1.7M) for services delivered in FY26 in connection with the reporting accountant engagement for the historical financial

information of the Group’s Detection business, covering the three years ended 31 July 2025. This engagement was required

to support the Company’s legal and regulatory requirements associated with the proposed demerger. Accordingly, the

related fees have been excluded from the calculation of non-audit services as a percentage of the audit fee. Following the

abortion of the demerger transaction, all services associated with the planned demerger have been terminated.

Total audit fee

£4.8m

Audit-related fees (including interim review)

£3.5m

Other services

£0.2m

Non-audit fee as a % of total audit and

audit-related fee %

1

11.1%

Date first appointed

13 November 2019

Uninterrupted audit tenure

7 years

Next financial period which requires a tender

FY2030

Tenure of Group engagement partner

4 years

Average tenure of component engagement

partners

3 years

94

Smiths Group plc Annual Report FY2026

KPMG LLP’S INDEPENDENT AUDITOR’S REPORT

CONTINUED

Materiality

(Item 6 below)

The scope of our work is influenced by our view of materiality and our assessed risk of material

misstatement.

We have determined overall materiality for the Group financial statements as a whole at £16m (FY2025:

£21m) and for the Parent Company financial statements as a whole at £12m (FY2025: £16.5m).

Consistent with FY2025, we determined that Group profit before tax from continuing operations (PBTCO),

normalised to exclude the effect of specific items as explained in section 6 of this report, remains the

benchmark for the Group as profitability, along with prospects of future cash flows, are important to the

users of the financial statements. As such, we based our Group materiality on normalised PBTCO of £329m

(FY2025: £412.7m), of which it represents 4.9% (FY2025: 5.1%).

Materiality for the Parent Company financial statements was determined with reference to a benchmark of

Parent Company total assets, limited to be less than Group materiality as a whole of which it represents

0.2% (FY2025: 0.4%).

Materiality levels used in our audit

16

21

12

15.7

12

16.5

12

16.5

2

1.5

0.8

1

Group

GPM

HCM

PLC

LCM

AMPT

FY2026 £m

FY2025 £m

Group

Group Materiality

GPM

Group Performance Materiality

HCM

Highest Component Materiality

PLC

Parent Company Materiality

LCM

Lowest Component Materiality

AMPT

Audit Misstatement Posting Threshold

Group Scope

(Item 7 below)

We have performed risk assessment procedures to determine which of the Group’s components are likely

to include risks of material misstatement to the Group financial statements, what audit procedures to

perform at these components, and the extent of involvement required from our component auditors

around the world.

Based on this assessment, we determined 2 (FY2025: 2) components as quantitatively significant

components, 0 (FY2025: 2) components as components where special audit consideration is necessary,

and 18 (FY2025: 23) other components where we performed procedures to obtain further audit coverage.

In addition, for the remaining components for which we performed no audit procedures, we performed

analysis at an aggregated Group level to re-examine our assessment that there is not a reasonable

possibility of a material misstatement in these components.

We consider the scope of our audit, as communicated to the ARC, to be an appropriate basis for our audit

opinion.

Coverage of Group financial statements

Our audit procedures covered 69% of Group revenue from continuing

operations:

Group

revenue

Group revenue

69%

We performed audit procedures in relation to components that

accounted for the following percentages:

Group

PBTCO

Group PBTCO

88%

Group Total assets

77%

Group

Total assets

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The impact of climate

change on our audit

We have considered the potential impacts of climate change on the financial statements

as part of planning our audit. As the Group has set out on page 48, climate change has

the potential to give rise to several transition risks and opportunities and physical

risks and opportunities. The Group has stated its commitment to achieve Net Zero for

Scope 1 & 2 emissions by 2040 and to achieve Net Zero for Scope 3 emissions by 2050.

The area of the financial statements that is most likely to be potentially affected by

climate-related changes and initiatives is future loss of revenue due to supply chain

challenges. The Group considered the impact of climate change and the Group’s

targets in the preparation of the financial statements, as described on page 112, and

concluded this did not have a material effect on the consolidated financial statements.

We performed a risk assessment, considering climate change risks and the commitments

made by the Group. We made inquiries of management regarding their processes for

assessing the potential impact of climate change risk on the Group’s financial statements

and held discussions with our own climate change professionals to challenge our

risk assessment.

Based on our risk assessment, we determined that there was no significant impact of

climate change on our key audit matters included in section 4 or other key areas of the

audit. We have read the Group’s disclosure of climate-related information in the front half of

the Annual Report and Accounts as set out on pages 47 to 52 and considered consistency

with the financial statements and our audit knowledge.

3. Going concern, viability and principal risks and uncertainties

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the

Parent Company or to cease their operations, and as they have concluded that the Group’s

and the Parent Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going

concern for at least a year from the date of approval of the financial statements (“the going concern period”).

Going concern

We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business

model and analysed how those risks might affect the Group’s and Parent Company’s financial resources or ability to continue operations

over the going concern period. The risks that we considered most likely to adversely affect the Group’s and Parent Company’s available

financial resources over this period were:

–

Adverse trading conditions and impact on the Group’s operations or that of its suppliers and customers, such as delays and cancellations

of orders and deliveries driven by geo-political and economic factors, resulting in a significant deterioration in the Group’s liquidity

position.

–

Product quality failure which would result in reputational damage amongst customers and therefore reduction in orders and customer

loss, as well as potential significant liability claims raised against the Group.

We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe but plausible

downside scenarios that could arise from these risks individually and collectively, against the level of available financial resources indicated

by the Group’s financial forecasts. We also assessed the completeness of the going concern disclosure.

Accordingly, based on those procedures, we found the Directors’ use of the going concern basis of accounting without any material

uncertainty for the Group and Parent Company to be acceptable. However, as we cannot predict all future events or conditions and as

subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the

above conclusions are not a guarantee that the Group or the Parent Company will continue in operation.

Our conclusions

–

We consider that the Directors’ use of the going concern basis of accounting

in the preparation of the financial statements is appropriate;

–

We have not identified, and concur with the Directors’ assessment that

there is not, a material uncertainty related to events or conditions that,

individually or collectively, may cast significant doubt on the Group’s or

Parent Company’s ability to continue as a going concern for the going

concern period;

–

We have nothing material to add or draw attention to in relation to the

Directors’ statement on page 53 of the financial statements on the use of

the going concern basis of accounting with no material uncertainties that

may cast significant doubt over the Group’s and Parent Company’s use of

that basis for the going concern period, and we found the going concern

disclosure on page 53 to be acceptable; and

–

The same statement under the UK Listing Rules is materially consistent

with the financial statements and our audit knowledge.

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Disclosures of emerging and principal risks and longer-term viability

Our responsibility

We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect

of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.

Based on those procedures, we have nothing material to add or draw attention to in relation to:

–

the Directors’ confirmation within the going concern and viability statement on page 53 that they have carried out a robust assessment of

the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency

and liquidity;

–

the risk management disclosures describing these risks and how emerging risks are identified and explaining how they are being

managed and mitigated; and

–

the Directors’ explanation in the going concern and viability statement of how they have assessed the prospects of the Group, over

what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a

reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their

assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We are also required to review the going concern and viability statement set out on page 53 under the UK Listing Rules.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit.

As we

cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that

were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s

and Parent Company’s longer-term viability.

Our reporting

We have nothing material to add or draw attention to in relation to these

disclosures.

We have concluded that these disclosures are materially consistent with the

financial statements and our audit knowledge.

4. Key audit matters

What we mean

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements

and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those

which had the greatest effect on:

–

the overall audit strategy;

–

the allocation of resources in the audit; and

–

directing the efforts of the engagement team.

We include below the key audit matters in decreasing order of audit significance together with our key audit procedures to address those matters and our results from those procedures. These matters were addressed, and

our results are based on procedures undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.

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4.1 Estimation of litigation provisions for asbestos in John Crane, Inc. (Group)

Financial statement elements

Our assessment of risk vs FY2025

Our results

FY2026

FY2025

We have not identified any significant changes to our assessment of

the level of risk relating to estimation of litigation provisions for

asbestos in JCI compared to FY2025.

FY2026: Acceptable

FY2025: Acceptable

Estimation of litigation provisions for JCI asbestos

£153m

£191m

Description of the key audit matter

Subjective estimate

There are significant judgements and estimates involved in the assumptions underlying the provision in

respect of JCI asbestos litigation, including the period over which potential claims are projected to arise,

the forecast number of future claims, and associated claim defence costs and complex estimation

methodology.

The effect of these matters is that, as part of our risk assessment, we determined that the asbestos

litigation provision has a high degree of estimation uncertainty, with a potential range of reasonable

outcomes greater than our materiality for the financial statements as a whole.

The financial statements (note 23) disclose the sensitivity estimated by the Group.

Our response to the risk

We performed the tests below rather than seeking to rely on any of the Group’s controls because the

nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed

procedures described.

Our procedures to address the risk included:

Our actuarial expertise:

Assessing the appropriateness of the ten-year projection period used by Group in

estimating the litigation provision using our own actuarial specialist and our sector knowledge and expertise.

Benchmarking assumptions:

Using our own actuarial specialists, we derived our own independent range of

the estimated provision and assessed whether the provision calculated by the Group falls within this range.

Enquiry of lawyers:

Obtaining external independent legal confirmations of historical and ongoing claims data

used by the Group’s expert for estimating the future projected cost and claims.

Assessment of the Group’s expert:

Assessing the competency, knowledge and independence of the expert

using our own actuarial specialist.

Assessing methodology:

Evaluating the methodology applied by the Group to determine the provision to

assess whether it is in line with applicable accounting standards.

Historical comparison:

Assessing and challenging the projected indemnity and defence expenditure through

retrospective review of incurred cost.

Assessing transparency:

Assessing whether the disclosures regarding reasonably possible changes in key

judgements and assumptions appropriately reflect the estimation uncertainty and risks inherent in the

calculation of the amount of provision.

Communications with the Smiths Group plc’s Audit & Risk Committee

Our discussions with and reporting to the ARC included:

–

Details of our audit approach and planned audit procedures, including engaging our actuarial specialist

team to form an independent expectation of the provision recognised in the year.

–

Our conclusion on the overall assessment of the assumptions supporting the litigation provision.

–

Assessment of the adequacy of the disclosures in the financial statements in respect of the sensitivity

of the provision to changes in key assumptions.

Areas of particular auditor judgement

We identified the following as the areas of particular auditor judgement:

–

Appropriateness of the ten-year projection period used by the Group in estimating the litigation provision;

and

–

The range of possible outcomes for the litigation provision considering court judgements from past claims.

Our results

We found the level of litigation provision in respect of John Crane, Inc. asbestos litigation to be acceptable

(FY2025: Acceptable).

Further information in the Annual Report and Accounts: See the Audit & Risk Committee Report on page 72 for details on how the ARC considered the estimation of litigation provision for JCI as an area of significant

attention, page 112 for the accounting policy on provisions for liabilities and charges, and page 154, note 23 for the financial disclosures.

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4.2 Accounting for the sale of Smiths Detection and Smiths Interconnect and related disclosures (Group)

Financial statement elements

Our assessment of risk vs FY2025

Our results

FY2026

FY2025

The sale of Smiths Detection and Smiths Interconnect is a key audit

matter in FY2026 due to the magnitude and strategic significance

of the transactions and the substantial auditor focus required to

assess the related accounting, including whether the transactions

were recognised in the appropriate accounting period, and the

appropriateness of the financial statement disclosures.

FY2026: Acceptable

FY2025: N/A

Gain on sale of discontinued operation

£1,690m

N/A

Description of the key audit matter

Accounting application

During the year, the Group completed the sale of the Smiths Detection and Smiths Interconnect

businesses, representing significant strategic transactions for the Group.

These transactions represented a significant area of auditor focus during the year due to the

magnitude of the transactions, the number of businesses and jurisdictions affected, and the extensive audit

procedures required to conclude on the accounting, including whether the transactions were recognised in

the appropriate accounting period, and the appropriateness of the related financial statement disclosures.

Overall, we considered this to be one of the areas that had the greatest effect on our overall audit strategy

and allocation of resources in planning and performing the related audit procedures.

Our response to the risk

We performed the procedures below rather than seeking to rely on Group’s controls because the

nature of the balance is such that we expected to obtain audit evidence primarily through the detailed

procedures described.

Our procedures to address the risk included:

Accounting application:

Assessing the Group’s accounting papers for the sale transactions against the

relevant accounting standard, including the basis for identifying the disposal date, de-recognition of the

relevant assets and liabilities and recognition of the resulting gain or loss on sale in the financial statements.

Inspection of transaction documentation:

Inspecting sale agreements, Board approvals including other

supporting documentation relating to the transactions to assess whether the accounting treatment

appropriately reflected the contractual terms of the transaction.

Testing sale proceeds:

Agreeing sale proceeds to the bank receipts and underlying documentation.

Assessing accounting period:

Performing procedures to assess whether the sale transaction, including the

resulting gain or loss and the de-recognition of the related assets and liabilities, has been recognised in the

appropriate accounting period.

Assessing transparency:

Assessing the adequacy of the related financial statement disclosures.

Communications with the Smiths Group plc’s Audit & Risk Committee

Our discussions with and reporting to the ARC included:

–

Details of our audit approach and planned audit procedures over the sale transactions.

–

Appropriateness of the accounting treatment applied to the sale transactions including

appropriateness of the recognition and measurement of gains and losses recognised on sale.

–

Adequacy of the disclosures in the financial statements.

Areas of particular auditor judgement

We did not identify any areas of particular auditor judgement.

Our results

We found the Group’s accounting for the sale of the Smiths Detection and Smiths Interconnect businesses,

together with the related disclosures, to be acceptable (FY2025: N/A).

Further information in the Annual Report and Accounts: See the Audit & Risk Committee Report on page 71 for details on how the ARC considered the accounting for the sale of Smiths Detection and Smiths Interconnect

divisions and related disclosures as an area of significant attention, page 117 for the accounting policy on the sale of Smiths Detection and Smiths Interconnect businesses, and page 160, note 28 for the financial disclosures.

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4.3 Accounting for the SIPS pension buy-in and recoverability of the related pension surplus (Parent Company)

Financial statement elements

Our assessment of risk vs FY2025

Our results

FY2026

FY2025

The risk has reduced in the current year following the execution

of the buy-in insurance policy, which significantly reduced the

estimation uncertainty associated with the SIPS defined benefit

pension scheme.

FY2026: Acceptable

FY2025: Acceptable

Retirement benefit scheme settlement loss

£57m

–

Description of the key audit matter

Accounting treatment

During FY2026, the Company executed a buy-in insurance policy in respect of the SIPS defined benefit

pension scheme. This required the Company to determine the appropriate accounting treatment for the

buy-in and de-recognition of the previously recognised pension surplus which involved judgement. Given

the significance of the transaction, this was considered to be a key audit matter.

In the prior year, the valuation of the SIPS defined benefit pension liabilities was identified as a key audit

matter due to the significant estimation uncertainty involved. While we continued to perform audit

procedures over the valuation of the defined benefit obligation in the current year, the execution of the

buy-in insurance policy significantly reduced that estimation uncertainty. Consequently, the prior-year key

audit matter is no longer considered to be one of the matters of most significance in the current year audit.

Instead, our focus was on the accounting for the buy-in transaction.

Our response to the risk

We performed the tests below rather than seeking to rely on any of the Parent Company’s controls because

the nature of the balance is such that we would expect to obtain audit evidence primarily through the

detailed procedures described.

Our procedures to address the risk included:

Benchmarking assumptions:

Challenging the key assumptions applied in the calculation of the pension

obligation as at the date of the transaction, including the discount rates, inflation rates, mortality and future

increases in pension payments with the support of our own actuarial specialists by comparing against

market data.

Assessing the actuary’s credentials:

Assessing the competence, independence and integrity of the

Company’s actuarial expert involved in the valuation of the defined benefit pension obligation.

Accounting application:

Inspecting contract documents, trustee minutes, project plan and communications to

assess whether the buy-in transaction has been accounted for appropriately in accordance with the relevant

accounting standard, involving our own actuarial specialists and using our sector knowledge and expertise.

Our actuarial expertise:

Assessing the Company’s judgements regarding the recoverability of any pension

surplus under the relevant accounting standards, including the allocation of a portion of any surplus remaining

to enhance member benefits, after the costs of buying-out and winding-up the scheme have been met and the

recoverability of any residual surplus, involving our own actuarial specialists.

Test of detail:

Confirmed the transfer of assets to the insurer to fund the initial premium for the buy-in. We

reconciled the underlying benefit cash flows, administration and other expenses to the external evidence

obtained.

Assessing transparency:

Considering the adequacy of the disclosures in respect of the buy-in transaction,

including the judgements applied by the Company.

Communications with the Smiths Group plc’s Audit & Risk Committee

Our discussions with and reporting to the ARC included:

–

Details of our audit approach and planned audit procedures over the SIPS buy-in transaction.

–

Our conclusion on the appropriateness of the accounting treatment including the allocation of a portion

of any pension surplus remaining to enhance member benefits after the costs of buying-out and

winding-up the scheme have been met and de-recognition of any residual surplus following the SIPS

buy-in.

–

Assessment of the adequacy of the related disclosures in the financial statements.

Areas of particular auditor judgement

We identified the following as the area of particular auditor judgement:

–

Assessment of the accounting treatment applied to the SIPS pension scheme buy-in, including the

recognition of an additional obligation in respect of the allocation of a portion of any pension surplus

remaining to enhance member benefits, after the costs of buying-out and winding-up the scheme have been

met and de-recognition of any residual surplus under the accounting standards.

Our results

We found the accounting of the buy-in, including the recognition of an additional obligation in respect of any

surplus sharing and recoverability of any residual surplus for the SIPS scheme in the period to be acceptable

(FY2025: Acceptable).

Further information in the Annual Report and Accounts: See the Audit & Risk Committee Report on page 71 for details on how the ARC considered the accounting of surplus in relation to the SIPS pension scheme buy-in as

an area of significant attention, page 116 for the accounting policy on pension obligations and post-retirement benefits, and page 130, note 8 for the financial disclosures.

In the prior year, the recoverability of goodwill for the Smiths Detection business (Group) was reported as a key audit matter. Following the sale of Smiths Detection during FY2026, impairment assessment of the related

goodwill no longer represented one of the matters of most significance in the current year audit and has therefore been removed as a key audit matter.

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5. Our ability to detect irregularities, and our response

Fraud – Identifying and responding to risks of material misstatement due to fraud

Fraud risk assessment

To identify risks of material misstatement due to fraud (“fraud risks”), we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an

opportunity to commit fraud. Our risk assessment procedures included:

–

Enquiring of Directors, the ARC, internal audit and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the

internal audit function, and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud.

–

Reading Board, Audit & Risk, Disclosure, Nomination & Governance and Remuneration & People Committee minutes.

–

Considering remuneration incentive schemes and performance targets for management and Directors including the organic revenue growth targets and EPS target for the

Directors’ long-term incentive plan.

–

Using analytical procedures to identify any unusual or unexpected relationships.

–

Involving forensic specialists to discuss identified events or conditions and findings of risk assessment procedures.

Risk communications

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the Group

auditor to component auditors of relevant fraud risks identified at the Group level and requesting component auditors performing procedures at the component level to report to the

Group auditor any identified fraud risk factors or identified or suspected instances of fraud.

Fraud risks

As required by auditing standards and considering possible pressures to meet profit targets, and our overall knowledge of the control environment, we perform procedures to

address the risk of management override of controls, in particular the risk that Group and component management may be in a position to make inappropriate accounting entries.

Following the sale of Smiths Detection and Smiths Interconnect, there is greater focus from investors on the performance of the continuing Group which creates additional pressure

on reporting strong performance. In our view, this gives rise to a heightened risk of management override of controls, which is a significant financial statement level fraud risk. This

could be perpetrated through mechanisms including journal entries, non-headline expenditure, estimates and judgements that are subject to management bias and greater

susceptibility to fraud.

On this audit, we do not believe there is a fraud risk related to revenue recognition due to limited opportunity from the simplicity of revenue transactions.

Procedures to address

fraud risks

We performed procedures including:

–

Identifying journal entries to test for all components where we performed audit procedures based on risk criteria and comparing the identified entries to supporting documentation.

These included entries posted in unusual account combinations, entries posted by a seldom user crediting an expense or revenue account, journal entries posted to seldom used

accounts crediting an expense or revenue account, journal entries with keywords, and entries posted by senior finance management including the individuals directly involved in the

divestment incentive scheme.

–

Testing consolidation adjustment entries posted and comparing the identified entries to supporting documentation.

–

Procedures in respect of non-headline expenditure.

–

Procedures over areas of estimation and judgement and reviewing changes in accounting policies and estimates.

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Laws and regulations – Identifying and responding to risks of material misstatement relating to compliance with laws and regulations

Laws and regulations

risk assessment

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector

experience, through discussion with the Directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal

correspondence, and discussed with the Directors and other management the policies and procedures regarding compliance with laws and regulations.

As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment, including the entity’s procedures for complying with regulatory

requirements.

Risk communications

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. This included communication

from the Group auditor to component auditors of relevant laws and regulations identified at the Group level, and a request for component auditors to report to the Group audit team

any instances of non-compliance with laws and regulations that could give rise to a material misstatement at Group level.

Direct laws context

and link to audit

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect the financial statements, including financial reporting legislation (including related companies’ legislation),

distributable profits legislation, taxation legislation and pensions legislation, and we assessed the extent of compliance with these laws and regulations as part of our procedures on

the related financial statement items.

Most significant indirect

law/regulation areas

Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial

statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety, anti-bribery and

corruption, considering dealings with government officials, employment law, and certain aspects of company legislation, recognising the nature of the Group’s activities and its

legal form.

Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and other management and inspection of

regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect

that breach.

Context

Context of the ability of

the audit to detect fraud

or breaches of law or

regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we

have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the

events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any

audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

Our audit procedures are designed to detect material misstatement.

We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-

compliance with all laws and regulations.

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6. Our determination of materiality

The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations to help us determine the scope of our audit and the nature, timing and extent of

our procedures, and in evaluating the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.

£16m (FY2025: £21m)

Materiality for the Group

financial statements as

a whole

What we mean

A quantitative reference for the purpose of planning and performing our audit.

Basis for determining materiality and judgements applied

Materiality for the Group financial statements as a whole was set at £16m (FY2025: £21m). This

was determined with reference to a benchmark of Group normalised profit before

tax from continuing operations (PBTCO).

Consistent with FY2025, we determined that normalised PBTCO remains the main benchmark

for the Group. We normalised PBTCO for the following items because they do not represent

normal, continuing operations of the Group. The items we adjusted for were retirement benefit

scheme settlement loss of £57m and corporate restructuring costs of £27m stated in note 3 of

the financial statements. (FY2025: PBTCO was normalised by adjusting for corporate

restructuring costs of £22m and impairment of prior year working capital balances of £15m).

Our Group materiality of £16m was determined by applying a percentage to the

normalised PBTCO. When using a benchmark of normalised PBTCO to determine overall

materiality, KPMG’s approach for listed entities considers a guideline range of 3-5% of the

measure. In setting Group materiality, we applied a percentage of 4.9% (FY2025: 5.1%) to the

benchmark.

Materiality for the Parent Company financial statements as a whole was set at £12m (FY2025:

£16.5m), determined with reference to a benchmark of Parent Company total assets, of which it

represents 0.2% (FY2025: 0.4%).

£12m (FY2025: £15.7m)

Performance materiality

What we mean

Our procedures on individual account balances and disclosures were performed to a lower

threshold, performance materiality, so as to reduce to an acceptable level the risk that

individually immaterial misstatements in individual account balances add up to a material

amount across the financial statements as a whole.

Basis for determining performance materiality and judgements applied

We consider performance materiality at a level of 75% (FY2025: 75%) of materiality for

Smiths Group plc Group financial statements as a whole to be appropriate.

The Parent Company performance materiality was set at £9m (FY2025: £12.3m), which

equates to 75% (FY2025: 75%) of materiality for the Parent Company financial statements

as a whole.

We applied this percentage in our determination of performance materiality because we

did not identify any factors indicating an elevated level of risk.

£0.8m (FY2025: £1m)

Audit misstatement

posting threshold

What we mean

This is the amount below which identified misstatements are considered to be clearly

trivial from a quantitative point of view. We may become aware of misstatements below

this threshold which could alter the nature, timing and scope of our audit procedures,

for example if we identify smaller misstatements which are indicators of fraud.

This is also the amount above which all misstatements identified are communicated to

Smiths Group plc’s ARC.

Basis for determining the audit misstatement posting threshold and

judgements applied

We set our audit misstatement posting threshold at 5% (FY2025: 5%) of our materiality for

the Group financial statements. We also report to the ARC any other identified

misstatements that warrant reporting on qualitative grounds.

The overall materiality for the Group financial statements of £16m (FY2025: £21m) compares as follows to the main financial statement caption amounts:

Total Group revenue

Group PBTCO

Total Group assets

FY2026

FY2025

1

FY2026

FY2025

1

FY2026

FY2025

Financial statement caption

£1,937m

£2,915m

£245m

£375m

£4,838m

£4,011m

Group materiality as % of caption

0.8%

0.7%

6.5%

5.6%

0.3%

0.5%

1 The comparative for Total Group revenue and Group PBTCO is on a total operations basis as reported in the FY2025 financial statements.

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7. The scope of our audit

Group scope

What we mean

How the Group auditor determined the procedures to be performed across the Group

.

We performed risk assessment procedures to determine which of the Group’s components

are likely to include risks of material misstatement to the Group financial statements and

which procedures to perform at these components to address those risks.

In total, we identified 248 (FY2025: 246) components, having considered our evaluation of

the Group’s operational structure, the Group’s legal structure, the existence of common

information systems, the existence of common risk profile across entities/divisions,

geographical locations, and our ability to perform audit procedures centrally.

Of those, we identified quantitatively significant components which contained the largest

percentages of either total revenue or total assets of the Group, for which we performed

audit procedures.

Additionally, having considered qualitative and quantitative factors, we selected additional

components with accounts contributing to the specific RMMs of the Group financial statements.

The below summarises where we performed audit procedures, with the prior year

comparatives indicated in brackets:

Component type

Number of

components where

we performed audit

procedures

Range of materiality applied

Quantitatively significant components

2 (2)

£7.5m – £12m

(£3m – £16.5m)

Components requiring special audit

consideration

0 (2)

Not in scope in FY2026

(£1.5m – £2m)

Other components where we performed

procedures

18 (23)

£2m – £7m

(£1.8m – £8m)

Total

20 (27)

We involved component auditors in performing the audit work on 18 (FY2025: 26) out of 20

(FY2025: 27) components and the audit of 2 components including the Parent Company, as

a component, was performed by the Group audit team. We performed audit procedures on

the items excluded from the normalised Group PBTCO used as the benchmark for our

materiality. We set the component materialities having regard to the mix of size and risk

profile of the Group across the components.

Our audit procedures covered 69% (FY2025: 71%) of Group revenue from continuing

operations. We performed audit procedures in relation to components that accounted for

88% (FY2025: 82%) of Group PBTCO and 77% (FY2025: 77%) of Group total assets.

For the remaining components for which we performed no audit procedures, no

component represented more than 2% (FY2025: 7%) of Group total revenue, Group PBTCO

or Group total assets.

We performed analysis at an aggregated Group level to re-examine

our assessment that there is not a reasonable possibility of a material misstatement in

these components.

The Group audit team has also performed audit procedures on the following areas on

behalf of the components:

–

Intercompany balances and transactions

–

Data and analytics routines on revenue and journal entries

–

IT audit involvement over:

i) Understanding of the information technology environment

ii) Test of design and implementation over general IT controls and automated controls

–

Controls environment, risk assessment, monitoring, information and communication

components of internal control over financial reporting

–

Review of transfer pricing arrangements across the Group

These items were audited by the Group team because of the centralised nature of the data

processing activities within the Group. The Group team communicated the results of these

procedures to the component auditors where relevant.

Impact of controls on our Group audit

The Group utilises a diverse range of IT systems across its operating businesses. For all of

the components where we performed audit procedures, we, with the assistance of our IT

specialists, obtained an understanding of the relevant IT systems for the purposes of our

audit work. On this audit, we take a predominantly substantive audit approach in all areas

of the audit due to the diverse nature of the Group’s information systems and IT general

controls, as well as having considered the efficiency and effectiveness of approaches to

gaining the appropriate audit evidence.

Given we did not rely upon manual or IT controls, we performed additional substantive

testing to respond to the risks identified. This included direct manual testing over the

completeness and reliability of data used in our data-orientated approach over testing

journals and revenue.

Group auditor oversight

What we mean

The extent of the Group auditor’s involvement in work performed by component auditors.

In working with component auditors, we:

–

Included the component auditors’ engagement partners and managers in the Group

planning discussions to facilitate inputs from component auditors in the identification

of matters relevant to the Group audit.

–

Issued Group audit instructions to component auditors on the scope and nature of

their work.

–

Visited 4 (FY2025: 5) component auditors in person as the audit progressed to understand

and evaluate their work and organised multiple video conferences with the component

auditors. At these visits, meetings and video conferences, the results of the planning

procedures and further audit procedures communicated to us were discussed in more

detail, and any further work required by us was then performed by the component auditors.

–

We inspected the work performed by the component auditors for the purpose of

the Group audit and evaluated the appropriateness of conclusions drawn from the

audit evidence obtained and consistencies between communicated findings and

work performed, with a particular focus on areas involving significant risks such as

management override of controls.

104

Smiths Group plc Annual Report FY2026

KPMG LLP’S INDEPENDENT AUDITOR’S REPORT

CONTINUED

8. Other information in the Annual Report

The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly,

we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

All other information

Our responsibility

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit

work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.

Our reporting

Based solely on that work we have not identified material misstatements or

inconsistencies in the other information.

Strategic report and Directors’ report

Our responsibility and reporting

Based solely on our work on the other information described above we report to you as follows:

–

we have not identified material misstatements in the strategic report and the Directors’ report;

–

in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

–

in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors’ remuneration report

Our responsibility

We are required to form an opinion as to whether the part of the Directors’ remuneration report to be audited has been properly

prepared in accordance with the Companies Act 2006.

Our reporting

In our opinion the part of the Directors’ remuneration report to be audited has been

properly prepared in accordance with the Companies Act 2006.

Corporate governance disclosures

Our responsibility

We are required to perform procedures to identify whether there is a material inconsistency between the financial statements

and our audit knowledge, and:

–

the Directors’ statement that they consider that the annual report and financial statements taken as a whole are fair,

balanced and understandable, and provide the information necessary for shareholders to assess the Group’s position and

performance, business model and strategy;

–

the section of the annual report describing the work of the Audit & Risk Committee, including the significant issues that the

Audit & Risk Committee considered in relation to the financial statements, and how these issues were addressed; and

–

the section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal

control systems.

Our reporting

Based on those procedures, we have concluded that each of these disclosures is

materially consistent with the financial statements and our audit knowledge.

We are also required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the

provisions of the UK Corporate Governance Code specified by the UK Listing Rules for our review.

We have nothing to report in this respect.

Other matters on which we are required to report by exception

Our responsibility

Under the Companies Act 2006, we are required to report to you if, in our opinion:

–

adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been

received from branches not visited by us; or

–

the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in

agreement with the accounting records and returns; or

–

certain disclosures of Directors’ remuneration specified by law are not made; or

–

we have not received all the information and explanations we require for our audit.

Our reporting

We have nothing to report in these respects.

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

105

KPMG LLP’S INDEPENDENT AUDITOR’S REPORT

CONTINUED

9. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 92, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as

they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or

have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report.

Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from

fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and Transparency Rule 4.1.17R and 4.1.18R.

This auditor’s report provides no assurance

over whether the annual financial report has been prepared in accordance with those requirements.

10. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we might state to the Company’s members

those matters we are required to state to them in an auditor’s report and for no other purpose.

To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the

Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Mike Barradell

(Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square, London, E14 5GL

21 September 2026

106

Smiths Group plc Annual Report FY2026

Consolidated income statement

Year ended 31 July 2026

Year ended 31 July 2025

– represented*

Notes

Headline

£m

Non-headline

(note 3)

£m

Total

£m

Headline

£m

Non-headline

(note 3)

£m

Total

£m

CONTINUING OPERATIONS

Revenue

1

1,937

–

1,937

1,898

–

1,898

Operating costs

2

(1,538)

(110)

(1,648)

(1,510)

(41)

(1,551)

Operating profit/(loss)

1

399

(110)

289

388

(41)

347

Interest income

4

44

–

44

35

–

35

Interest expense

4

(80)

–

(80)

(62)

4

(58)

Other financing losses

4

–

(13)

–

(11)

Other finance income – retirement benefits

4

–

5

–

4

Finance costs

4

(36)

(8)

(44)

(27)

(3)

(30)

Profit/(loss) before taxation

363

(118)

245

361

(44)

317

Taxation

6

(89)

1

(88)

(82)

19

(63)

Profit/(loss) for the year

274

(117)

157

279

(25)

254

DISCONTINUED OPERATIONS

Profit from discontinued operations

28

153

1,662

1,815

133

(95)

38

PROFIT/(LOSS) FOR THE YEAR

427

1,545

1,972

412

(120)

292

Profit/(loss) for the year attributable to:

Smiths Group shareholders – continuing operations

272

(117)

155

277

(25)

252

Smiths Group shareholders – discontinued operations

153

1,662

1,815

133

(95)

38

Non-controlling interests

2

–

2

–

2

427

1,545

1,972

412

(120)

292

EARNINGS PER SHARE

Basic

628.8p

85.7p

Basic – continuing

49.5p

74.5p

Diluted

626.2p

85.3p

Diluted – continuing

49.3p

74.1p

* Results for the year ended 31 July 2025 have been represented to reflect the reclassification of the Smiths Detection and certain Flex-Tek general industrial businesses as discontinued operations.

References in the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity and consolidated

cash-flow statement relate to notes on pages 120 to 166, which form an integral part of the consolidated accounts.

CONSOLIDATED PRIMARY STATEMENTS

107

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

Consolidated statement of comprehensive income

Notes

Year ended

31 July 2026

£m

Year ended

31 July 2025

represented*

£m

PROFIT FOR THE YEAR

1,972

292

Other comprehensive income (OCI)

OCI which will not be reclassified to the income statement:

Re-measurement of retirement benefit assets and obligations

8

(70)

(3)

Taxation on post-retirement benefit movements

6

14

–

Fair value movements on financial assets at fair value through OCI

14

–

8

(56)

5

OCI which will be reclassified and reclassifications:

Fair value gains and reclassification adjustments:

– deferred in the period on cash-flow and net investment hedges

3

(1)

– reclassified to income statement on cash-flow and net investment hedges

(1)

2

1

Foreign exchange (FX) movements:

Exchange losses on translation of foreign operations

(15)

(35)

Exchange gains recycled to the income statement on disposal of business

(35)

–

(50)

(35)

Total other comprehensive income, net of taxation

(104)

(29)

TOTAL COMPREHENSIVE INCOME

1,868

263

Attributable to:

Smiths Group shareholders

1,869

261

Non-controlling interests

(1)

2

1,868

263

Total comprehensive income attributable to Smiths Group shareholders arising from:

Continuing operations

89

241

Discontinued operations

1,780

20

1,869

261

* Results for the year ended 31 July 2025 have been represented to reflect the reclassification of the Smiths Detection and certain Flex-Tek general industrial businesses as discontinued operations.

CONSOLIDATED PRIMARY STATEMENTS

CONTINUED

108

Smiths Group plc Annual Report FY2026

Consolidated balance sheet

Notes

31 July 2026

£m

31 July 2025

£m

NON-CURRENT ASSETS

Intangible assets

10

624

1,284

Property, plant and equipment

12

208

244

Right of use assets

13

95

99

Financial assets – other investments

14

6

Retirement benefit assets

8

2

128

Deferred tax assets

6

78

98

Trade and other receivables

16

78

90

Financial derivatives

20

–

10

1,091

1,959

CURRENT ASSETS

Inventories

15

284

586

Current tax receivable

6

9

20

Trade and other receivables

16

464

737

Cash and cash equivalents

18

2,956

195

Financial derivatives

20

21

7

Assets held for sale

28

13

507

3,747

2,052

TOTAL ASSETS

4,838

4,011

CURRENT LIABILITIES

Financial liabilities – borrowings

18

(563)

(3)

Financial liabilities – lease liabilities

18

(24)

(29)

Financial liabilities – financial derivatives

20

(2)

Provisions

23

(45)

(56)

Trade and other payables

17

(675)

(679)

Current tax payable

6

(35)

(66)

Liabilities held for sale

28

(7)

(106)

(1,351)

(941)

NON-CURRENT LIABILITIES

Financial liabilities – borrowings

18

(537)

(556)

Financial liabilities – lease liabilities

18

(80)

(79)

Financial liabilities – financial derivatives

20

(22)

–

Provisions

23

(160)

(198)

Retirement benefit obligations

8

(50)

(96)

Deferred tax liabilities

6

(23)

(43)

Trade and other payables

17

(10)

(38)

(882)

(1,010)

TOTAL LIABILITIES

(2,233)

(1,951)

NET ASSETS

2,605

2,060

Notes

31 July 2026

£m

31 July 2025

£m

SHAREHOLDERS’ EQUITY

Share capital

24

111

124

Share premium account

365

Capital redemption reserve

44

31

Merger reserve

235

Cumulative translation adjustments

169

317

Retained earnings

1,733

1,147

Hedge reserve

26

(75)

(183)

TOTAL SHAREHOLDER’S EQUITY

2,582

2,036

Non-controlling interest equity

26

23

24

TOTAL EQUITY

2,605

2,060

The accounts on pages 107 to 166 were approved by the Board of Directors on 21 September 2026

and were signed on its behalf by:

Roland Carter

Julian Fagge

Chief Executive Officer

Chief Financial Officer

CONSOLIDATED PRIMARY STATEMENTS

CONTINUED

109

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

Consolidated statement of changes in equity

Notes

Share capital

and share

premium

£m

Other

reserves

£m

Cumulative

translation

adjustments

£m

Retained

earnings

£m

Hedge

reserve

£m

Equity

shareholders’

funds

£m

Non-controlling

interest

£m

Total

equity

£m

At 31 July 2025

489

266

317

1,147

(183)

2,036

24

2,060

Profit for the year

–

1,970

–

1,970

2

1,972

Other comprehensive income:

– re-measurement of retirement benefits after tax

–

(56)

–

(56)

–

(56)

– FX movements net of recycling

–

(148)

(5)

106

(47)

(3)

(50)

– fair value gains and related tax

–

2

–

2

Total comprehensive income for the year

–

(148)

1,909

108

1,869

(1)

1,868

Transactions relating to ownership interests:

Purchase of shares by Employee Benefit Trust

–

(43)

–

(43)

–

(43)

Proceeds received on exercise of employee share options

–

2

–

2

–

2

Share buybacks

24

(13)

13

–

(1,159)

–

(1,159)

–

(1,159)

Dividends:

– equity shareholders

25

–

(149)

–

(149)

–

(149)

Share-based payment

9

–

26

–

26

–

26

At 31 July 2026

476

279

169

1,733

(75)

2,582

23

2,605

Notes

Share capital

and share

premium

£m

Other

reserves

£m

Cumulative

translation

adjustments

£m

Retained

earnings

£m

Hedge

reserve

£m

Equity

shareholders’

funds

£m

Non-controlling

interest

£m

Total

equity

£m

At 31 July 2024

495

260

353

1,306

(184)

2,230

22

2,252

Profit for the year

–

290

–

290

2

292

Other comprehensive income:

– re-measurement of retirement benefits after tax

–

(3)

–

(3)

–

(3)

– FX movements net of recycling

–

(36)

1

–

(35)

–

(35)

– fair value gains and related tax

–

8

1

9

–

9

Total comprehensive income for the year

–

(36)

296

1

261

2

263

Transactions relating to ownership interests:

Purchase of shares by Employee Benefit Trust

–

(23)

–

(23)

–

(23)

Proceeds received on exercise of employee share options

–

1

–

1

–

1

Share buybacks

24

(6)

6

–

(303)

–

(303)

–

(303)

Dividends:

– equity shareholders

25

–

(152)

–

(152)

–

(152)

Share-based payment

9

–

22

–

22

–

22

At 31 July 2025

489

266

317

1,147

(183)

2,036

24

2,060

CONSOLIDATED PRIMARY STATEMENTS

CONTINUED

110

Smiths Group plc Annual Report FY2026

Consolidated cash-flow statement

Notes

Year ended

31 July 2026

£m

Year ended

31 July 2025

£m

Net cash inflow from operating activities

29

241

456

CASH-FLOWS FROM INVESTING ACTIVITIES

Expenditure on capitalised development

–

(4)

Expenditure on other intangible assets

(3)

(4)

Purchases of property, plant and equipment

(64)

(72)

Disposals of property, plant and equipment

8

–

(Investment in)/disposal of financial assets

(1)

53

Acquisition of businesses (net of £6m of cash acquired with businesses)

27

(159)

(121)

Acquisition of businesses related to discontinued operations

28

(6)

–

Acquisition of business - deferred consideration

(11)

–

Proceeds on disposal of subsidiaries, net of cash disposed

28

3,245

(12)

Net cash-flow used in investing activities

3,009

(160)

CASH-FLOWS FROM FINANCING ACTIVITIES

Share buybacks

24

(839)

(303)

Purchase of shares by Employee Benefit Trust

26

(43)

(23)

Proceeds received on exercise of employee share options

2

1

Settlement of cash-settled options

–

(1)

Dividends paid to equity shareholders

25

(149)

(152)

Cash inflow from matured derivative financial instruments

(4)

2

Increase in new borrowings

565

–

Lease payments

(41)

Net cash-flow used in financing activities

(509)

(517)

Net increase/(decrease) in cash and cash equivalents

2,741

(221)

Cash and cash equivalents at beginning of year

195

459

Movement in cash held in disposal groups

31

(31)

Foreign exchange rate movements

(11)

(12)

Cash and cash equivalents at end of year

18

2,956

195

Cash and cash equivalents at end of year comprise:

– cash at bank and in hand

100

102

– short-term deposits

2,856

93

2,956

195

CONSOLIDATED PRIMARY STATEMENTS

CONTINUED

111

Smiths Group plc Annual Report FY2026

Overview

Strategic report

Governance

Financial statements

ACCOUNTING POLICIES

112

Smiths Group plc Annual Report FY2026

Basis of preparation

The accounts have been prepared in accordance with UK adopted International Accounting

Standards.

The consolidated financial statements have been prepared under the historical cost convention

modified to include revaluation of certain financial instruments, share options and pension assets

and liabilities, held at fair value as described below.

Going concern

The Directors have prepared a going concern assessment, covering a period of at least 12 months

from the date of approval of the financial statements, which takes into account the current

financial projections and the borrowing facilities available to the Group and then applies a severe

but plausible downside scenario.

This assessment is consistent with the conclusions of the Group’s ‘Going concern and viability

statement’ on pages 53 and 54, which has been based on the Group’s strategy, balance sheet and

financing position, including our undrawn US$800m committed Revolving Credit Facility which

matures in May 2030. Having assessed the principal and emerging risks, especially those most

relevant during the going concern assessment period, stress testing confirmed that the Group

will have adequate headroom over that period.

Consequently, the Directors are satisfied that the Group and Company has sufficient resources

for its operational needs and will be able to meet its liabilities as they fall due for a period of at

least 12 months from the date of approval of these financial statements. The financial statements

have therefore been prepared on a going concern basis.

Climate change

Climate change is recognised as a principal risk and uncertainty for the Group, both in terms of

the risk of climate-related incidents causing disruption to our supply chain or operations and the

risk of changes in climate conditions cause business disruption and economic loss for the Group.

In preparing the financial statements, the directors have considered the impact of climate

change, particularly in the context of the risks identified in the TCFD disclosures on pages 47 to

52, and in the preparation of our Strategic Plan, which underpins our viability statement and going

concern review modelling.

There has been no material impact identified on the financial reporting judgements and

estimates. Overall, sustainability is recognised as a growth driver for the Group and a key part of

our investment case. This is consistent with our assessment that climate change is not expected

to have a detrimental impact on the viability of the Group in the medium term.

These financial statements cover the financial year from 1 August 2025 to 31 July 2026 (FY2026)

with comparative figures from 1 August 2024 to 31 July 2025 (FY2025).

Key estimates and significant judgements

The preparation of the accounts in conformity with generally accepted accounting principles

requires management to make estimates and judgements that affect the reported amounts of

assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts

and the reported amounts of revenues and expenses during the reporting period. Actual results

may differ from these estimates.

The key sources of estimation uncertainty together with the significant judgements and

assumptions used for these consolidated financial statements are set out below.

Sources of estimation uncertainty

Business combinations

During FY2026 the Group acquired one business, DRC Heat Transfer (DRC). On the acquisition of a

business, the Group is required to identify specific intangible assets which are recognised

separately from goodwill and then amortised over their estimated useful lives. The assumptions

involved in determining the fair values for assets and liabilities acquired, including the separate

identification of intangible assets, and the useful economic life of such items use management

estimates and are therefore subjective.

Management have engaged a third party specialist to assist with the valuation of the acquired

intangible assets for DRC, see note 27 for further information. Depending on the nature of the

assets the Group has used different valuation methodologies to arrive at the fair value including the

excess earnings method and the relief from royalty method.

Provisions for liabilities and charges

The Group has made provisions for claims and litigations where it has had to defend itself against

proceedings brought by other parties. These provisions have been made for the best estimate of

the expected expenditure required to settle each obligation, although there can be no guarantee

that such provisions (which may be subject to potentially material revision from time to time) will

accurately predict the actual costs and liabilities that may be incurred. The most significant of

these litigation provisions is described below.

John Crane, Inc. (JCI), a subsidiary of the Group, is one of many co-defendants in litigation relating

to products previously manufactured which contained asbestos. Provision of £153m (FY2025:

£191m) has been made for the future defence costs which the Group is expected to incur and the

expected costs of future adverse judgements against JCI. Whilst well-established incidence

curves can be used to estimate the likely future pattern of asbestos-related disease, JCI’s claims

experience is significantly impacted by other factors which influence the US litigation

environment. These can include: changing approaches on the part of the plaintiffs’ bar; changing

attitudes amongst the judiciary at both trial and appellate levels; and legislative and procedural

changes in both the state and federal court systems. Because of the significant uncertainty

associated with the future level of asbestos claims and of the costs arising out of the related

litigation, there can be no guarantee that the assumptions used to estimate the provision will

result in an accurate prediction of the actual costs that will be incurred.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

113

ACCOUNTING POLICIES

CONTINUED

In quantifying the expected costs JCI takes account of the advice of an expert in asbestos liability

estimation. The following estimates were made in preparing the provision calculation:

–

The period over which the expenditure can be reliably estimated is judged to be ten years,

based on past experience regarding significant changes in the litigation environment that

have occurred every few years and on the amount of time taken in the past for some of those

changes to impact the broader asbestos litigation environment. See note 23 for a sensitivity

analysis showing the impact on the provision of reducing or increasing this time horizon; and

–

The future trend of legal costs, the rate of future claims filed, the rate of successful resolution

of claims, and the average amount of judgements awarded have been projected based on the

past history of JCI claims and well-established tables of asbestos incidence projections, since

this is the best available evidence. Claims history from other defendants is not used to calculate

the provision because JCI’s defence strategy generates a significantly different pattern of legal

costs and settlement expenses. See note 23 for a sensitivity analysis showing the range of

expected future spend.

Taxation

Taxation liabilities included provisions of £16m (FY2025: £35m), the majority of which related to

the risk of challenge to the geographic allocation of profits by tax authorities.

In addition to the risks provided for, the Group faces a variety of other tax risks, which result from

operating in a complex global environment, including the ongoing reform of both international and

domestic tax rules, new and ongoing tax audits in the Group’s larger markets and the challenge to

fulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of

the Group’s global operations.

The Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24

months. Due to the uncertainty associated with such tax items, it is possible that the conclusion

of open tax matters may result in a final outcome that varies significantly from the amounts

noted above.

Significant judgements made in applying accounting policies

Business combinations

As stated in the previous section ‘Sources of estimation uncertainty’, in FY2026 the Group has

applied judgement on the identification of specific intangible assets on the DRC business

acquisition, see note 27 for further information. These include items such as brand names, order

backlog and customer relationships, to which value is first attributed at the time of acquisition.

In FY2026, appropriate professional advice has been sought on the allocation of value for the DRC

acquisition.

Taxation

As stated in the previous section ‘Sources of estimation uncertainty’, the Group has applied

judgement in the decisions made to recognise provisions against uncertain tax positions; please

see note 6 for further details.

Presentation of headline profits and organic growth

In order to provide users of the accounts with a clear and consistent presentation of the

performance of the Group’s ongoing trading activity, the income statement is presented in a

three-column format with ‘headline’ profits shown separately from non-headline items. In

addition, the Group reports organic growth rates for sales and profit measures.

See note 1 for disclosures of headline operating profit and note 30 for more information about the

alternative performance measures (‘APMs’) used by the Group.

Judgement is required in determining which items should be included as non-headline. The

amortisation/impairment of acquired intangibles, legacy liabilities, material one-off items and

certain re-measurements are included in a separate column of the income statement. See note 3

for a breakdown of the items excluded from headline profit.

Calculating organic growth also requires judgement. Organic growth adjusts the movement

in headline performance to exclude the impact of foreign exchange and acquisitions.

Significant accounting policies

Basis of consolidation

The Group’s consolidated accounts include the financial statements of Smiths Group plc (the

‘Company’) and all entities controlled by the Company (its subsidiaries). A list of the subsidiaries

of Smiths Group plc is provided on pages 181 to 184.

The Company controls an entity when it (i) has power over the entity; (ii) is exposed or has rights to

variable returns from its involvement with the entity; and (iii) has the ability to affect those returns

through its power over the entity. The Group reassesses whether or not it controls a subsidiary if

facts and circumstances indicate that there are changes to one or more of these three elements

of control. Subsidiaries are fully consolidated from the date on which control is obtained by the

Company to the date that control ceases.

Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along

with any related non-controlling interest and other components of equity. Any resulting gain or

loss is recognised in the income statement. Any interest retained in the former subsidiary is

measured at fair value when control is lost.

The non-controlling interests in the Group balance sheet represent the share of net assets of

subsidiary undertakings held outside the Group. The movement in the year comprises the profit

attributable to such interests together with any dividends paid, movements in respect of corporate

transactions and related exchange differences.

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

statements include the Group’s share of the profit or loss and other comprehensive income of

equity-accounted investees, until the date on which significant influence ceases.

All intercompany transactions, balances, and gains and losses on transactions between Group

companies are eliminated on consolidation.

Foreign currencies

The Company’s presentational currency and functional currency is sterling. The financial position

of all subsidiaries and associates that have a functional currency different from sterling are

translated into sterling at the rate of exchange at the date of that balance sheet, and the income

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and expenses are translated at average exchange rates for the period. All resulting foreign

exchange rate movements are recognised as a separate component of equity.

Foreign exchange rate movements arising on the translation of non-monetary assets and

liabilities held in hyperinflationary subsidiaries are recognised in OCI. The amounts taken to the

Cumulative Translation Adjustments reserve represent the combined effect of restatement and

translation and are expressed as a net change for the year.

On consolidation, foreign exchange rate movements arising from the translation of the net

investment in foreign entities, and of borrowings and other currency instruments designated as

hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold,

the cumulative amount of such foreign exchange rate movements is recognised in the income

statement as part of the gain or loss on sale.

Foreign exchange rate movements arising on transactions are recognised in the income

statement. Those arising on trading are taken to operating profit; those arising on borrowings are

classified as finance income or cost.

Revenue

Revenue is measured at the fair value of the consideration received, net of trade discounts

(including distributor rebates) and sales taxes. Revenue is discounted only where the impact of

discounting is material.

When the Group enters into complex contracts with multiple, separately identifiable components,

the terms of the contract are reviewed to determine whether or not the elements of the contract

should be accounted for separately. If a contract is being split into multiple components, the

contract revenue is allocated to the different components at the start of the contract. The basis of

allocation depends on the substance of the contract. The Group considers relative stand-alone

selling prices, contractual prices and relative cost when allocating revenue.

The Group has identified the following different types of revenue:

(i) Sale of goods recognised at a point in time – generic products manufactured by Smiths

Generic products are defined as either:

–

Products that are not specific to any particular customer;

–

Products that may initially be specific to a customer but can be reconfigured at minimal cost,

i.e., retaining a margin, for sale to an alternative customer; or

–

Products that are specific to a customer but are manufactured at Smiths risk, i.e., we have no

right to payment of costs plus margin if the customer refuses to take control of the goods.

For established products with simple installation requirements, revenue is recognised when control of

the product is passed to the customer. The point in time that control passes is defined in accordance

with the agreed shipping terms and is determined on a case-by-case basis. The time of dispatch or

delivery of the goods to the customer is normally the point at which invoicing occurs. However for some

generic products, revenue is recognised when the overall performance obligation has been completed,

which is often after the customer has completed its acceptance procedures and has assumed control.

Products that are sold under multiple element arrangements, i.e., contracts involving a combination of

products and services, are bundled into a single performance obligation unless the customer can

benefit from the goods or services either on their own, or together with other resources that are readily

available to the customer and are distinct within the context of the contract.

For contracts that pass control of the product to the customer only on completion of installation

services, revenue is recognised upon completion of the installation.

An obligation to replace or repair faulty products under the standard warranty terms is recognised as a

provision. If the contract includes terms that either extend the warranty beyond the standard term or

imply that maintenance is provided to keep the product working, these are service warranties and

revenue is deferred to cover the performance obligation in an amount equivalent to the relative

stand-alone selling price of that service.

(ii) Sale of goods recognised over time – customer-specific products where the contractual terms

include rights to payment for work performed to date

Customer-specific products are defined as being:

–

Products that cannot be reconfigured economically such that it remains profitable to sell to another

customer;

–

Products that cannot be sold to another customer due to contractual restrictions; and

–

Products that allow Smiths to charge for the work performed to date in an amount that represents

the costs incurred to date plus a margin, should the customer refuse to take control of the goods.

For contracts that meet the terms listed above, revenue is recognised over the period that the Group is

engaged in the manufacture of the product, calculated using the input method based on the amount of

costs incurred to date compared to the overall costs of the contract. This is considered to be a faithful

depiction of the transfer of the goods to the customer as the costs incurred, total expected costs and

total order value are known. The time of dispatch or delivery of the goods to the customer is normally

the point at which invoicing occurs.

An obligation to provide a refund for faulty products under the standard warranty terms is recognised

as a provision. If the contract includes terms that either extend the warranty beyond the standard term

or imply that maintenance is provided to keep the product working, these are service warranties and

revenue is deferred to cover the performance obligation in an amount equivalent to the relative

stand-alone selling price of that service.

(iii) Services recognised over time – services relating to the installation, repair and ongoing

maintenance of equipment

Services include installation, commissioning, testing, product repairs and contracts undertaking

extended warranty services.

For complex installations where the supply of services cannot be separated from the supply of

product, revenue is recognised upon acceptance of the combined performance obligation (see Sale of

goods (i) above).

For services that can be accounted for as a separate performance obligation, revenue is recognised

over time, assessed on the basis of the actual service provided as a proportion of the total services to

be provided.

Depending on the nature of the contract, revenue is recognised as follows:

–

Installation, commissioning and testing services (when neither linked to the supply of product nor

subject to acceptance) are recognised rateably as the services are provided;

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–

Product repair services, where the product is returned to Smiths premises for remedial action, are

recognised when the product is returned to the customer and they regain control of the asset;

–

Onsite ad hoc product repair services are recognised rateably as the services are performed;

–

Long-term product repair and maintenance contracts are recognised rateably over the contract

term; and

–

Extended service warranties are recognised rateably over the contract term.

Invoicing for services depends on the nature of the service provided with some services charged in

advance and others in arrears.

Where contracts are accounted for under the revenue recognised over time basis, the proportion of

costs incurred is used to determine the percentage of contract completion.

Contracts for the construction of substantial assets, which normally last in excess of one year, are

accounted for under the revenue recognised over time basis, using an input method.

For fixed-price contracts, revenue is recognised based upon an assessment of the amount of cost

incurred under the contract, compared to the total expected costs that will be incurred under the

contract. This calculation is applied cumulatively with any over/under recognition being adjusted in the

current period.

For cost-plus contracts, revenue is recognised based upon costs incurred to date plus any

agreed margin.

For both fixed-price and cost-plus contracts, invoicing is normally based on a schedule with

milestone payments.

Contract costs

The Group has taken the practical expedient of not capitalising contract costs as they are expected to be

expensed within one year from the date of signing.

Leases

Lease liabilities are initially measured at the present value of the future lease payments at the

commencement date, discounted by using either the rate implicit in the lease, or if not observable, the

Group’s incremental borrowing rate. Lease payments comprise contractual lease payments; variable

lease payments that depend on an index or rate, initially measured using the index or rate at the

commencement date; and the amount expected to be payable under residual value guarantees.

Right of use assets are measured at commencement date at the amount of the corresponding lease

liability and initial direct costs incurred. Right of use assets are depreciated over the shorter of the lease

term and the useful life of the right of use assets, unless there is a transfer of ownership or purchase

option which is reasonably certain to be exercised at the end of the lease term, in which case

depreciation is charged over the useful life of the underlying asset. Right of use assets are subject

to impairment.

When a lease contract is modified, either from a change to the duration of the lease or a change to

amounts payable, the Group remeasures the lease liability by discounting the revised future lease

payments at a revised discount rate. A corresponding adjustment is made to the carrying value of the

related right of use asset.

Leases of buildings typically have lease terms between one and seven years, while plant and machinery

generally have lease terms between one and three years. The Group also has certain leases of

machinery with lease terms of 12 months or less and leases of office equipment with low value (typically

below £5,000). The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition

exemptions for these leases and recognises the lease payments associated with these leases as an

expense on a straight-line basis over the lease term.

Interest on lease liabilities is presented as a financing activity in the Consolidated Cash-Flow Statement,

included under the heading lease payments.

Taxation

The charge for taxation is based on profits for the year and takes into account taxation deferred because

of temporary differences between the treatment of certain items for taxation and accounting purposes.

Current income tax assets and liabilities are measured at the amount expected to be recovered from or

paid to taxation authorities. Tax benefits are not recognised unless it is likely that the tax positions are

sustainable. Tax positions taken are then reviewed to assess whether a provision should be made based

on prevailing circumstances. Tax provisions are included in current tax liabilities. The tax rates and tax

laws used to compute the amount are those that are enacted or substantively enacted, at the reporting

date in the countries where the Group operates and generates taxable income.

The Group operates and is subject to taxation in many countries. Tax legislation is different in each

country, is often complex and is subject to interpretation by management and government authorities.

These matters of judgement give rise to the need to create provisions for uncertain tax positions which

are recognised when it is considered more likely than not that there will be a future outflow of funds to a

taxing authority. Provisions are made against individual exposures and take into account the specific

circumstances of each case, including the strength of technical arguments, recent case law decisions

or rulings on similar issues and relevant external advice.

The amounts are measured using one of the following methods, depending on which of the methods the

Directors expect will better reflect the amount the Group will pay to the tax authority:

–

The single best estimate method is used where there is a single outcome that is more likely than

not to occur. This will happen, for example, where the tax outcome is binary or the range of possible

outcomes is very limited; or

–

Alternatively, a probability weighted expected value is used where, on the balance of probabilities,

there will be a payment to the tax authority but there are a number of possible outcomes. In this case,

a probability is assigned to each outcome and the amount provided is the sum of these risk-weighted

amounts. In assessing provisions against uncertain tax positions, management uses in-house tax

experts, professional firms and previous experience of the taxing authority to evaluate the risk.

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 relief.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and

associates, except where the timing of the reversal of the temporary differences is controlled by the

Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax liabilities and assets are not discounted.

Tax is charged or credited to the income statement except when it relates to items charged or credited

directly to equity, in which case the tax is also dealt with in equity.

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IAS 12 International Tax Reform: Pillar Two Model Rules

On 19 July 2023, the UK Endorsement Board adopted the Amendments to IAS 12 International Tax

Reform: Pillar Two Model Rules, issued by the IASB in May 2023. The Amendments introduce a

temporary mandatory exception from accounting for deferred taxes arising from the Pillar Two model

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.

Employee benefits

Share-based compensation

The fair value of share awards and share options granted are recognised as an expense over their

vesting period to reflect the value of the employee services received. The fair value of options granted,

excluding the impact of any non-market vesting conditions, is calculated using established option

pricing models, principally binomial models. The probability of meeting non-market vesting conditions,

which include profitability targets, is used to estimate the number of share awards which are likely

to vest.

For cash-settled share-based payment, a liability is recognised based on the fair value of the payment

earned by the balance sheet date. For equity-settled share-based payment, the corresponding credit is

recognised directly in reserves.

Pension obligations and post-retirement benefits

Pensions and similar benefits (principally healthcare) are accounted for under IAS 19. The retirement

benefit obligation in respect of the defined benefit plans is the liability (the present value of all expected

future obligations) less the fair value of the plan assets.

The income statement expense is allocated between current service costs, reflecting the increase

in liability due to any benefit accrued by employees in the current period, any past service costs/

credits and settlement losses or gains which are recognised immediately, and the scheme

administration costs.

Actuarial gains and losses are recognised in the statement of comprehensive income in the year in

which they arise. These comprise the impact on the liabilities of changes in demographic and financial

assumptions compared with the start of the year, actual experience being different to assumptions and

the return on plan assets being above or below the amount included in the net pension interest cost.

Payments to defined contribution schemes are charged as an income statement expense as they

fall due.

Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of

the identifiable net assets of the acquired subsidiary at the date of acquisition.

The goodwill arising from acquisitions of subsidiaries after 1 August 1998 is included in intangible

assets, tested annually for impairment and carried at cost less accumulated impairment losses. Gains

and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

The goodwill arising from acquisitions of subsidiaries before 1 August 1998 was set against reserves in

the year of acquisition.

Goodwill is tested for impairment at least annually. Should the test indicate that the net realisable value

of the CGU is less than current carrying value, an impairment loss will be recognised immediately in the

income statement. Subsequent reversals of impairment losses for goodwill are not recognised.

Research and development

Expenditure on research and development is charged to the income statement in the year in which it is

incurred with the exception of:

–

Amounts recoverable from third parties; and

–

Expenditure incurred in respect of the development of major new products where the outcome of

those projects is assessed as being reasonably certain as regards viability and technical feasibility.

Such expenditure is capitalised and amortised over the estimated period of sale for each product,

commencing in the year that the product is ready for sale. Amortisation is charged straight line or

based on the units produced, depending on the nature of the product and the availability of reliable

estimates of production volumes.

The cost of development projects which are expected to take a substantial period of time to complete

includes attributable borrowing costs.

Intangible assets acquired in business combinations

The identifiable net assets acquired as a result of a business combination may include intangible assets

other than goodwill. Any such intangible assets are amortised straight line over their expected useful

lives as follows:


Patents, licences and trademarks	up to 20 years
Technology	up to 13 years
Customer relationships	up to 15 years

The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Software, patents and intellectual property

The estimated useful lives are as follows:


Software	up to seven years
	shorter of the economic life and the period the right is
Patents and intellectual property	legally enforceable

The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

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Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any

recognised impairment losses.

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 lives. In general, the

rates used are:


Freehold and long leasehold buildings	2% per annum
Short leasehold property	over the period of the lease
Plant, machinery, etc.	10% to 20% per annum
Fixtures, fittings, tools and other equipment	10% to 33% per annum

The cost of any assets which are expected to take a substantial period of time to complete includes

attributable borrowing costs.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance

sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the

asset’s carrying amount is greater than its estimated recoverable amount.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in,

first-out method. The cost of finished goods and work in progress comprises raw materials, direct

labour, other direct costs and related production overheads (based on normal operating capacity).

The cost of items of inventory which take a substantial period of time to complete includes attributable

borrowing costs.

The net realisable value of inventories is the estimated selling price in the ordinary course of business,

less applicable variable selling expenses. Provisions are made for any slow-moving, obsolete or

defective inventories.

Trade and other receivables

Trade receivables are either classified as ‘held to collect’ and initially recognised at fair value and

subsequently measured at amortised cost, less any appropriate provision for expected credit losses or

as ‘held to collect and sell’ and measured at fair value through other comprehensive income (FVOCI).

A provision for expected credit losses is established when there is objective evidence that it will not be

possible to collect all amounts due according to the original payment terms. Expected credit losses are

determined using historical write-offs as a basis, adjusted for factors that are specific to the debtor,

general economic conditions of the industry in which the debtor operates and with a default risk

multiplier applied to reflect country risk premium. The Group applies the IFRS 9 simplified lifetime

expected credit loss approach for trade receivables and contract assets which do not contain a

significant financing component.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result

of a past event, it is probable that an outflow of resources embodying economic benefits will be required

to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where

the Group expects some or all of a provision to be reimbursed, for example under an insurance

contract, the reimbursement is recognised as a separate asset but only when the reimbursement is

virtually certain.

Provisions for warranties and product liability, disposal indemnities, restructuring costs, property

dilapidations and legal claims are recognised when: the Company has a legal or constructive obligation

as a result of a past event; it is probable that an outflow of resources will be required to settle the

obligation; and the amount has been reliably estimated. Provisions are not recognised for future

operating losses.

Provisions are discounted where the time value of money is material.

Where there is a number of similar obligations, for example where a warranty has been given, the

likelihood that an outflow will be required in settlement is determined by considering the class of

obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any

one item included in the same class of obligations may be small.

Businesses held for sale

Businesses classified as held for sale are measured at the lower of carrying amount and fair value less

costs to sell. Impairment losses on initial classification as held for sale and gains or losses on

subsequent remeasurements are included in the income statement. No depreciation is charged on

assets and businesses classified as held for sale.

Businesses are classified as held for sale if their carrying amount will be settled principally through a

sale rather than through continuing use and the following criteria are met:

–

The business must be available for immediate sale in its present condition;

–

Management is committed to the plan to sell the business and an active programme to locate a buyer

and complete the plan must have been initiated;

–

The disposal group must be actively marketed for sale at a price that is reasonable in relation to its

current fair value;

–

Shareholder and regulatory approval is highly probable and the plan is unlikely to be significantly

changed or withdrawn; and

–

Sale is expected to be completed within 12 months of the balance sheet date.

The assets and liabilities of businesses held for sale are presented as separate lines on the

balance sheet.

Discontinued operations

A discontinued operation is either:

–

A component of the Group’s business that represents a separate major line of business or

geographical area of operations that has been disposed of, has been abandoned or meets the criteria

to be classified as held for sale;

–

Is part of a single coordinated plan to dispose of a separate major line of business or geographical

area of operations; or

–

A business acquired solely for the purpose of selling it.

Discontinued operations are presented on the income statement as a separate line and are shown net

of tax.

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In accordance with IAS 21, gains and losses on intra-group monetary assets and liabilities are not

eliminated. Therefore foreign exchange rate movements on intercompany loans with discontinued

operations are presented on the income statement as non-headline finance cost items.

Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing

securities with maturities of three months or less.

In the cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which are

included as current borrowings in liabilities on the balance sheet.

Financial assets

The classification of financial assets depends on the purpose for which the assets were acquired.

Management determines the classification of an asset at initial recognition and re-evaluates the

designation at each reporting date. Financial assets are classified as: measured at amortised cost,

fair value through other comprehensive income or fair value through profit and loss.

Financial assets primarily include trade receivables, cash and cash equivalents (comprising cash at

bank, money-market funds, and short-term deposits), short-term investments, derivatives (foreign

exchange contracts and interest rate derivatives) and unlisted investments.

–

Trade receivables are classified either as ‘held to collect’ and measured at amortised cost or as

‘held to collect and sell’ and measured at fair value through other comprehensive income (FVOCI).

The Group may sell trade receivables due from certain customers before the due date. Any trade

receivables from such customers that are not sold at the reporting date are classified as ‘held to

collect and sell’.

–

Cash and cash equivalents (consisting of balances with banks and other financial institutions, money-

market funds and short-term deposits) and short-term investments are subject to low market risk.

Cash balances, short-term deposits and short-term investments are measured at amortised cost.

Money market funds are measured at fair value through profit and loss (FVPL).

–

Derivatives are measured at FVPL.

–

Listed and unlisted investments are measured at FVOCI.

–

Deferred contingent consideration are measured at FVPL.

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

rewards of ownership.

On initial recognition, the Group may make an irrevocable election to designate certain investments as

FVOCI, if they are not held for trading or relate to contingent consideration on a business combination.

When securities measured at FVOCI are sold or impaired, the accumulated fair value adjustments

remain in reserves.

Financial assets are classified as current if they are expected to be realised within 12 months of the

balance sheet date.

Financial liabilities

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 amortised under the

effective interest rate method through the income statement as interest over the life of the loan and

added to the liability disclosed in the balance sheet. Related accrued interest is included in the

borrowings figure.

Borrowings 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.

Derivative financial instruments and hedging activities

The Group uses derivative financial instruments to hedge its exposures to foreign exchange, interest

rates and commodity prices arising from its operating and financing activities.

Derivative financial instruments are initially recognised at fair value on the date a derivative contract is

entered into and are subsequently re-measured at their fair value. The method of recognising any

resulting gain or loss depends on whether the derivative financial instrument is designated as a hedging

instrument and, if so, the nature of the item being hedged.

Where derivative financial instruments are designated into hedging relationships, the Group formally

documents the following:

–

The risk management objective and strategy for entering the hedge;

–

The nature of the risks being hedged and the economic relationship between the hedged item and the

hedging instrument; and

–

Whether the change in cash-flows of the hedged item and hedging instrument are expected to offset

each other.

Changes in the fair value of any derivative financial instruments that do not qualify for hedge accounting

are recognised immediately in the income statement.

Fair value hedge

The Group uses derivative financial instruments to convert part of its fixed rate debt to floating rate in

order to hedge the risks arising from its external borrowings.

The Group designates these as fair value hedges of interest rate risk. Changes in the hedging

instrument are recorded in the income statement, together with any changes in the fair values of the

hedged assets or liabilities that are attributable to the hedged risk to the extent that the hedge is

effective. Gains or losses relating to any ineffectiveness are immediately recognised in the income

statement.

Cash-flow hedge

Cash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.

The effective portions of changes in the fair values of derivatives that are designated and qualify as

cash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is

recognised immediately in the income statement. Amounts accumulated in the hedge reserve are

recycled in the income statement in the periods when the hedged items will affect profit or loss (for

example, when the forecast sale that is hedged takes place).

If a forecast transaction that is hedged results in the recognition of a non-financial asset (for example,

inventory) or a liability, the gains and losses previously deferred in the hedge reserve are transferred

from the reserve and included in the initial measurement of the cost of the asset or liability. When a

hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge

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accounting, any cumulative gain or loss existing in the hedge reserve at that time remains in the reserve

and is recognised when the forecast transaction is ultimately recognised in the income statement.

When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was

reported in other comprehensive income is immediately transferred to the income statement.

Net investment hedge

Hedges of net investments in foreign operations are accounted for similarly to cash-flow hedges. Any

gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in

other comprehensive income; the gain or loss relating to any ineffective portion is recognised

immediately in the income statement. When a foreign operation is disposed of, gains and losses

accumulated in equity related to that operation are included in the income statement for that period.

Fair value of financial assets and liabilities

The fair values of financial assets and financial liabilities are the amounts at which the instrument could

be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

IFRS 13: ‘Fair value measurement’ requires fair value measurements to be classified according to the

following hierarchy:

–

Level 1 – quoted prices in active markets for identical assets or liabilities;

–

Level 2 – valuations in which all inputs are observable either directly (i.e., as prices) or indirectly (i.e.

derived from prices); and

–

Level 3 – valuations in which one or more inputs that are significant to the resulting value are not

based on observable market data.

See note 21 for information on the methods which the Group uses to estimate the fair values of its

financial instruments.

Dividends

Dividends are recognised as a liability in the period in which they are authorised. The interim dividend

is recognised when it is paid and the final dividend is recognised when it has been approved by

shareholders at the Annual General Meeting.

New accounting standards effective 2026

The accounting policies adopted in the preparation of these consolidated financial statements are

consistent with those followed in the previous financial year.

Standards, interpretations and amendments that became effective in the current financial year have not

had a material impact on the Consolidated Financial Statements.

New standards and interpretations not yet adopted

At the date of authorisation of these Consolidated Financial Statements, the Group has not applied any

standards, interpretations or amendments that have been issued but are not yet effective.

The impact of IFRS 18 ‘Presentation and Disclosures in Financial Statements’ is under assessment:

–

IFRS 18 becomes effective for the financial year ending 31 July 2028, with comparatives restated.

–

IFRS 18 will affect how the Group presents and discloses its financial performance; it will not impact

the recognition or measurement of any items in the financial statements. The standard includes

requirements for the aggregation and disaggregation of financial information based on the identified

roles of the primary financial statements. Income and expenses will be classified into five categories

on the face of the income statement: operating, investing, financing, taxation and discontinued

operations. The Group’s profit before tax will not change. Disclosures relating to ‘management-

defined performance measures’, a subset of the Group’s alternative performance measures (APMs),

will be included in the audited notes to the financial statements.

–

The Group has made progress in assessing the impact of IFRS 18 and during the next financial year

the Group will implement finance system changes to enable reporting in accordance with IFRS 18.

Until this work is completed, it is not practical to quantify the effects of IFRS 18.

Other standards, interpretations and amendments issued but not yet effective are not expected to

have a material impact on the consolidated Group financial statements.

Parent Company

The ultimate Parent Company of the Group is Smiths Group plc, a company incorporated in

England and Wales and listed on the London Stock Exchange.

The accounts of the Parent Company, Smiths Group plc, have been prepared in accordance with

the Companies Act 2006 and Financial Reporting Standard 101, ‘Reduced Disclosure Framework’.

The Company accounts are presented in separate financial statements on pages 173 to 180.

The principal subsidiaries of the Parent Company are listed in the above accounts.

120

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

1. Segment information

Analysis by operating segment

The Group is organised into two major business segments: John Crane and Flex-Tek. These business

segments design, manufacture and support the following products:

–

John Crane

– mechanical seals, seal support systems, power transmission couplings and

specialised filtration systems; and

–

Flex-Tek

– engineered components, flexible hosing and rigid tubing that heat and move fluids

and gases.

The position and performance of each business segment are reported at each Board meeting to

the Board of Directors. This information is prepared using the same accounting policies as the

consolidated financial information except that the Group uses headline operating profit to monitor

the segmental results and operating assets to monitor the segmental position. See note 3 and

note 30 for an explanation of which items are excluded from headline measures.

The segmental information of the Smiths Interconnect, Smiths Detection and certain Flex-Tek

general industrial discontinued operations is disclosed in note 28.

Intersegment sales and transfers are charged at arm’s length prices.

Segment trading performance


	Year ended 31 July 2026
			Corporate
	John Crane	Flex-Tek	costs	Total
	£m	£m	£m	£m
Revenue	1,130	807	–	1,937
Segmental headline operating profit	270	170	–	440
Corporate headline operating costs	–	–	(41)	(41)
Headline operating profit/(loss)	270	170	(41)	399
Items excluded from headline measures
(note 3)	4	(46)	(68)	(110)
Operating profit/(loss)	274	124	(109)	289
Headline operating margin	23.9%	21.0%		20.6%


	Year ended 31 July 2025 – represented*
			Corporate
	John Crane	Flex-Tek	costs	Total
	£m	£m	£m	£m
Revenue	1,115	783	–	1,898
Segmental headline operating profit	265	169	–	434
Corporate headline operating costs	–	–	(46)	(46)
Headline operating profit/(loss)	265	169	(46)	388
Items excluded from headline measures
(note 3)	(1)	(27)	(13)	(41)
Operating profit/(loss)	264	142	(59)	347
Headline operating margin	23.8%	21.6%		20.5%

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Operating profit is stated after charging the following items:


	Year ended 31 July 2026
			Corporate and
	John Crane	Flex-Tek	non-headline	Total
	£m	£m	£m	£m
Depreciation – property, plant and equipment	12	8	2	22
Depreciation – right of use assets	15	7	1	23
Amortisation of software, patents & intellectual property	3	–	–	3
Amortisation of acquired intangibles	–	–	33	33
Restructuring costs	–	–	27	27
Share-based payment	3	2	14	19


	Year ended 31 July 2025 – represented*
			Corporate and
	John Crane	Flex-Tek	non-headline	Total
	£m	£m	£m	£m
Depreciation – property, plant and equipment	16	7	3	26
Depreciation – right of use assets	14	6	1	21
Amortisation of software, patents & intellectual property	4	–	1	5
Amortisation of acquired intangibles	–	–	30	30
Restructuring costs	–	–	16	16
Impairment – prior year working capital	–	–	15	15
Share-based payment	4	3	8	15

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

121

NOTES TO THE ACCOUNTS

CONTINUED

The corporate and non-headline column comprises central information technology, human

resources and headquarters costs and non-headline expenses (see note 3).

Segment assets and liabilities

Segment assets


	31 July 2026
			Corporate and
	John Crane	Flex-Tek	non-headline	Total
	£m	£m	£m	£m
Property, plant, equipment, right of use assets, other
intangibles and investments	211	104	6	321
Inventory, trade and other receivables	555	259	12	826
Segment assets	766	363	18	1,147


	31 July 2025
			Smiths	Corporate and
	John Crane	Flex-Tek	Detection	non-headline	Total
	£m	£m	£m	£m	£m
Property, plant, equipment, right of use
assets, development costs, other intangibles
and investments	185	113	132	11	441
Inventory, trade and other receivables	518	251	622	22	1,413
Segment assets	703	364	754	33	1,854

Non-headline assets comprise receivables relating to non-headline items, acquisitions & disposals.

Segment liabilities


	31 July 2026
			Corporate and
	John Crane	Flex-Tek	non-headline	Total
	£m	£m	£m	£m
Segmental liabilities	167	120	–	287
Corporate and non-headline liabilities	–	–	603	603
Segment liabilities	167	120	603	890


	31 July 2025
			Smiths	Corporate and
	John Crane	Flex-Tek	Detection	non-headline	Total
	£m	£m	£m	£m	£m
Segmental liabilities	173	105	374	–	652
Corporate and non-headline liabilities	–	–	–	319	319
Segment liabilities	173	105	374	319	971

Non-headline liabilities comprise provisions and accruals relating to non-headline items,

acquisitions & disposals.

Reconciliation of segment assets and liabilities to statutory assets and liabilities


	Assets		Liabilities
	31 July	31 July	31 July	31 July
	2026	2025	2026	2025
	£m	£m	£m	£m
Segment assets and liabilities	1,147	1,854	(890)	(971)
Goodwill and acquired intangibles	612	1,192	–	–
Derivatives	21	17	(24)	(2)
Current and deferred tax	87	118	(58)	(109)
Retirement benefit assets and obligations	2	128	(50)	(96)
Cash and borrowings	2,956	195	(1,204)	(667)
Assets and liabilities held for sale	13	507	(7)	(106)
Statutory assets and liabilities	4,838	4,011	(2,233)	(1,951)

Segment capital expenditure

The capital expenditure on property, plant and equipment, capitalised development and other

intangible assets for each business segment is:


			Smiths	Corporate and
	John Crane	Flex-Tek	Detection	non-headline	Total
	£m	£m	£m	£m	£m
Capital expenditure year ended 31 July 2026	30	9	–	–	39
Capital expenditure year ended 31 July 2025	41	13	13	–	67

Segment capital employed

Capital employed is a non-statutory measure of invested resources. It comprises statutory net

assets adjusted to add goodwill recognised directly in reserves in respect of subsidiaries acquired

before August 1998 of £433m (FY2025: £478m) and eliminate retirement benefit assets and

obligations and litigation provisions relating to non-headline items, both net of related tax, and net

debt. See note 30 for a reconciliation of net assets to capital employed.

The 12-month rolling average capital employed by business segment, which Smiths uses to

calculate segmental return on capital employed, is:


			31 July 2026
	John Crane	Flex-Tek	Total
	£m	£m	£m
Average segmental capital employed – continuing operations	1,104	643	1,747
Average capital employed – assets held for sale			1,317
Average corporate capital employed			(50)
Average total capital employed – total Group			3,014

122

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

	31 July 2025
	John Crane	Flex-Tek	Total
	£m	£m	£m
Average segmental capital employed	1,051	594	1,645
Average capital employed – assets held for sale			1,621
Average corporate capital employed			(62)
Average total capital employed – total Group			3,204

The Smiths Interconnect and Smiths Detection divisions and certain Flex-Tek general industrial

businesses are included as assets held for sale in the table above. Further details of the segmental

asset and liabilities of the Smiths Interconnect division is disclosed in note 28.

Analysis of revenue

The revenue for the main product and service lines for each business segment is:

	Original
	equipment	Aftermarket	Total
John Crane	£m	£m	£m
Revenue year ended 31 July 2026	334	796	1,130
Revenue year ended 31 July 2025	322	793	1,115

	Aerospace	Construction	Thermal Solutions	Total
Flex-Tek	£m	£m	£m	£m
Revenue year ended 31 July 2026	227	359	221	807
Revenue year ended 31 July 2025*	210	371	202	783

*

The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of certain Flex-Tek

general industrial businesses as discontinued operations. Following the classification of certain Flex-Tek general

industrial businesses as discontinued operations, the Group has reviewed and reanalysed the Flex-Tek segmental

revenue reporting by main product line. The driver of this reanalysis being to realign this analysis of segmental revenue

with how management review the performance of the remaining Flex-Tek segment.

The impact of this reanalysis is that £678m of FY2025 revenue that had previously been reported as Industrials has

been represented with £371m recognised as Construction, £202m recognised as Thermal Solutions, £51m recognised

as Aerospace and £54m reclassified to discontinued operations.

Segmental revenue is analysed by the Smiths Group key global markets as follows:

	General		Aerospace
	Industrial	Energy	& Defence	Total
	£m	£m	£m	£m
John Crane revenue
Revenue year ended 31 July 2026	418	712	–	1,130
Revenue year ended 31 July 2025	413	702	–	1,115
Flex-Tek revenue
Revenue year ended 31 July 2026	580	–	227	807
Revenue year ended 31 July 2025*	573	–	210	783
Total revenue
Revenue year ended 31 July 2026	998	712	227	1,937
Revenue year ended 31 July 2025*	986	702	210	1,898

*

The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations. Following the classification

of certain Flex-Tek general industrial businesses as discontinued operations, the Group has reviewed and reanalysed

the Flex-Tek segmental revenue reporting by main key global market. The driver of this reanalysis being to realign this

analysis of segmental revenue with how management review the performance of the remaining Flex-Tek segment.

The impact of this reanalysis is that £105m of FY2025 revenue that was previously reported in the general industrial key

global market has been represented, with £51m disclosed in the Aerospace key global market and £54m reclassified to

discontinued operations.

The Group’s statutory revenue is analysed as follows:

		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
	£m	£m
Sale of goods recognised at a point in time	1,564	1,539
Sale of goods recognised over time	7	10
Services recognised over time	366	349
	1,937	1,898

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

123

NOTES TO THE ACCOUNTS

CONTINUED

Analysis by geographical areas

The Group’s revenue by destination and non-current operating assets by location are shown below:


	Americas	Europe	Asia Pacific	Rest of World	Total
	£m	£m	£m	£m	£m
Revenue year ended 31 July 2026	1,225	293	250	169	1,937
Revenue year ended 31 July 2025*	1,180	277	260	181	1,898
31 July 2026 – non-current operating assets by geographical location:
Intangible assets	536	76	12	–	624
Property, plant and equipment	127	34	19	28	208
Right of use assets	60	19	6	10	95
Other receivables	60	15	1	2	78
Non-current operating assets	783	144	38	40	1,005
31 July 2025 – non-current operating assets by geographical location:
Intangible assets	794	476	14	–	1,284
Property, plant and equipment	140	61	23	20	244
Right of use assets	51	33	10	5	99
Other receivables	56	22	1	5	84
Non-current operating assets	1,041	592	48	30	1,711

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

The other receivables balance in the table above comprises current and non-current other

receivables (see note 16) excluding financial instruments.

Revenue by destination attributable to the United Kingdom was £33m (FY2025: £35m).

Other revenue found to be significant included, the United States of America, totalling £997m

(FY2025: £960m), China (excluding Hong Kong) £96m (FY2025: £104m) and Canada £82m

(FY2025: £81m). Revenue by destination has been selected as the basis for attributing revenue

to geographical areas as this was the geographic attribution of revenue used by management

to review business performance.

Non-current assets located in the United Kingdom total £79m (FY2025: £180m). Significant

non-current assets held in the United States of America £646m (FY2025: £902m) and Germany

£30m (FY2025: £370m).

2. Operating costs

The Group’s operating costs for continuing operations are analysed as follows:


	Year ended 31 July 2026			Year ended 31 July 2025 – represented*
		Non-headline			Non-headline
	Headline	(note 3)	Total	Headline	(note 3)	Total
	£m	£m	£m	£m	£m	£m
Cost of sales – direct materials,
labour, production and
distribution overheads	1,129	–	1,129	1,097	–	1,097
Selling costs	159	–	159	150	–	150
Administrative expenses	250	110	360	263	41	304
Total	1,538	110	1,648	1,510	41	1,551

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Operating profit is stated after charging:


		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
	£m	£m
Research, development and customer-specific engineering expense	64	63
Depreciation of property, plant and equipment	22	26
Depreciation of right of use assets	23	22
Amortisation of intangible assets	36	34

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Research, development and customer-specific engineering (RD&E) cash costs were £64m

(FY2025: £63m) comprising £64m (FY2025: £63m) of RD&E expensed to the income statement.

Administrative expenses include £2m (FY2025: £1m) in respect of lease payments for short-term

and low-value leases which were not included within right of use assets and lease liabilities.

124

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Auditors’ remuneration

The following fees were paid or are payable to the Company’s auditors, KPMG LLP and other firms

in the KPMG network, for the year ended 31 July 2026.


		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
	£m	£m
Audit services
Fees payable to the Company’s auditors for the audit of the Company’s
annual financial statements	2.4	2.9
Fees payable to the Company’s auditors and its associates for other
services:
– the audit of the Company’s subsidiaries	2.4	3.5
	4.8	6.4
Audit related assurance services (i)	3.5	2.1
Other assurance services (ii)	0.2	0.2
Total fees	8.5	8.7

*

The comparatives for the year to 31 July 2025 have been represented to include an additional £0.4m of fees related to

scope changes on the FY2025 audit.

(i) Audit related assurance services includes £0.4m (FY2025: £0.4m) for review of interim report

and £3.1m (FY2025: £1.7m) for services delivered in FY2026 related to the reporting accountant

engagement for the historical financial information of the Group’s Detection business, covering the

three years ended 31 July 2025. This engagement was required to support the Company’s legal and

regulatory requirements associated with the proposed demerger. Accordingly, the related fees have

been excluded from the calculation of non-audit services as a percentage of the audit fee. Following

the termination of the demerger transaction, all services associated with the planned demerger

have been terminated.

(ii) Other assurance services include £0.09m (FY2025: £0.1m) for limited assurance over the Group’s

Scope 1–3 greenhouse gas emissions metrics and £0.1m (FY2025: £0.1m) for services related to the

issuance of the Euro Medium Term Note (EMTN) programme.

Total fees for non-audit services comprise 13% (FY2025: 10%) of audit fees, as noted above

£3.1m (FY2025: £1.7m) of reporting accountant services have been excluded from the calculation

of this ratio.

3. Non-statutory profit measures

Headline profit measures

The Group has identified and defined a ‘headline’ measure of performance which is not impacted by

material non-recurring items or items considered non-operational/trading in nature. This non-

GAAP measure of profit is not intended to be a substitute for any IFRS measures of performance,

but is a key measure used by management to understand and manage performance. See the

disclosures on presentation of results in accounting policies for an explanation of the adjustments.

The items excluded from ‘headline’ are referred to as ‘non-headline’ items.

Non-headline operating profit items

i. Continuing operations

The non-headline items included in statutory operating profit for continuing operations were

as follows:


			Year ended
		Year ended	31 July 2025
		31 July 2026	represented*
	Notes	£m	£m
Acquisition and disposal related costs
Post-acquisition integration costs and fair value adjustment unwind		(3)	(4)
Fair value movement on contingent consideration		3	4
Loss on disposal of financial asset		–	(3)
Separation related expenses		(8)	–
Business acquisition costs and related expenses		(2)	(2)
Legacy pension scheme arrangements
Scheme administration costs	8	(6)	(4)
Retirement benefit scheme settlement loss	8	(57)	–
Non-headline provision movements
Provision held against Titeflex Corporation subrogation claims	23	(4)	5
Provision for John Crane, Inc. asbestos litigation	23	30	12
John Crane, Inc. asbestos litigation management expense		(1)	–
Cost recovery for John Crane, Inc. asbestos litigation		–	1
Other items
Corporate restructuring costs		(27)	(16)
Cyber incident remediation costs		–	(4)
Amortisation of acquired intangible assets	10	(33)	(29)
Funding of charitable foundation		(2)	(1)
Non-headline items in operating profit – continuing operations		(110)	(41)

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Acquisition and disposal related costs

The £3m (FY2025:£4m) of post-acquisition integration costs and fair value adjustment unwind

principally relate to Flex-Tek’s recent corporate acquisitions.

These have been recognised as

non-headline as the charge did not relate to trading activity.

The £3m current year fair value gain on contingent consideration is attributable to the revaluation of

deferred contingent consideration payable on Flex-Tek’s recent acquisitions. These are considered

to be a non-headline item on the basis that these fair value charges do not relate to trading activity.

In FY2025 the £3m loss on disposal of financial asset related to the block sale discount on the

disposal of the Group’s remaining investment in ICU shares. This is considered a non-headline

charge as it did not relate to trading activity.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

125

NOTES TO THE ACCOUNTS

CONTINUED

In the current year £8m (FY2025: £nil) of separation related expenses have been recognised in

continuing operations for activities undertaken by the Group in relation to the strategic actions to

divest the Smiths Interconnect and Smiths Detection businesses and right size the remaining

Smiths Group operations.

These costs have been reported as non-headline as they are non-

recurring strategic project expenses and do not relate to trading activity.

The £2m (FY2025: £2m) of business acquisition costs and related expenses represent incremental

deal costs related to the Group’s business acquisition activity. These items do not include the cost of

employees working on transactions and are reported as non-headline because they are dependent

on the level of activity being undertaken and do not relate to trading activity.

Legacy pension scheme arrangements

Scheme administration costs of £6m (FY2025: £4m) relate to the TIGPS legacy pension scheme

and SIPS ‘path to buy-in’ costs. These are non-headline charges as the Smiths Group effectively has

no economic exposure to these costs and they are paid from cash retained in the scheme.

A £57m retirement benefit scheme settlement loss has been recognised in the current year

(FY2025: £nil) following SIPS executing an insurance buy-in policy for its remaining uninsured

liabilities (see note 8 for further details). This item is reported as non-headline as it is non-recurring

and relates to legacy pension liabilities.

Non-headline provision movements

The following litigation costs and recoveries have been treated as non-headline items because the

provisions were treated as non-headline when originally recognised and the subrogation claims

and litigation relate to products that the Group no longer sells in these markets:

–

The £4m expense (FY2025: £5m credit) recognised by Titeflex Corporation was principally

driven by an increase in the number of expected claims. See note 23 for further details;

–

The £30m credit (FY2025: £12m credit) in respect of John Crane, Inc. asbestos litigation is due

to a reduction in the future expected indemnity costs. See note 23 for further details; and

–

In FY2026 £1m of professional fees have been incurred litigation management, in FY2025 £1m

of asbestos litigation costs were recovered by John Crane, Inc. via insurer settlements.

Other items

Corporate restructuring costs of £27m (FY2025: £16m) were incurred on the previously announced

Group-wide Acceleration Plan. These costs are treated as non-headline due to being material and

part of a pre-approved two year programme.

In the prior year the Group incurred a cyber security incident that involved unauthorised access to

the Company’s systems and £4m of remediation costs were incurred. These costs have been

recognised as non-headline as this was a significant non-recurring event for the Group and did not

relate to trading activity.

Acquisition related intangible asset amortisation costs of £33m (FY2025: £29m) were recognised in

the current period. This is considered to be a non-headline item on the basis that these charges

result from acquisition accounting and do not relate to current trading activity.

The £2m funding of charitable foundation charge is the FY2026 funding (FY2025: £1m) of the Smiths

Group Foundation, a charitable giving foundation with a committed initial £10m of funding linked to

engineering-related good causes. This is recognised as non-headline as the charge did not relate to

trading activity and has been funded by allocating a portion of disposal proceeds to the foundation

on a regular basis.

Non-headline finance costs items

The non-headline items included in finance costs for continuing operations were as follows:

			Year ended
		Year ended	31 July 2025
		31 July 2026	represented*
	Notes	£m	£m
Unwind of discount on provisions	23	(8)	(9)
Unwind of discount on other payables		–	(1)
Other finance income – retirement benefits	8	5	4
Release of interest payment on overdue VAT		–	4
Other sundry financing losses		(5)	(1)
Non-headline items in finance costs – continuing operations		(8)	(3)
Continuing operations – non-headline loss before taxation		(118)	(44)

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

The financing elements of non-headline legacy liabilities, including the £8m (FY2025: £9m) unwind

of discount on provisions, were excluded from headline finance costs because these provisions

were originally recognised as non-headline and this treatment has been maintained for ongoing

costs and credits.

Other finance income comprises £5m (FY2025: £4m) of financing credits relating to retirement

benefits. These were excluded from headline finance costs because the ongoing costs and credits

are a legacy of previous employee pension arrangements.

Other sundry financing losses of £5m (FY2025: £1m) include £2m of losses on the hedging of

non-sterling intercompany financing, £1m fair value hedge ineffectiveness on the two Eurobonds

and £2m of other foreign exchange losses.

Non-headline taxation credit

The non-headline items included in taxation for continuing operations were as follows:

			Year ended
		Year ended	31 July 2025
		31 July 2026	represented*
	Notes	£m	£m
Tax credit on non-headline loss	6	17	12
Increase in unrecognised UK deferred tax asset	6	(16)	7
Non-headline taxation credit – continuing operations		1	19
Continuing operations – non-headline loss for the year		(117)	(25)

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

126

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Movement in unrecognised UK deferred tax asset

These movements are reported as non-headline because the original credit was reported as

non-headline.

ii. Discontinued operations

The non-headline items for discontinued operations, see note 28 for additional disclosures, were as

follows:


			Year ended
		Year ended	31 July 2025
		31 July 2026	represented*
	Notes	£m	£m
Non-headline operating profit items
Impairment loss on reclassification to held for sale		(11)	(30)
Interconnect separation related costs		–	(8)
Detection restructuring and separation related costs		(8)	(16)
Amortisation of acquisition related intangible assets		(6)	(23)
Impairment of prior year working capital balances		–	(15)
Environmental remediation provision		(5)	(2)
Non-headline finance costs items
Other finance losses		(1)	(1)
Gain on sale of discontinued operations
Gain on the sale of Smiths Interconnect to Molex Electronic
Technologies Holdings, LLC	28	877	–
Gain on the sale of Smiths Detection to CVC Capital Partners	28	807	–
Gain on the sale of other discontinued operations	28	6	–
Non-headline taxation items
Tax on non-headline loss		3	–
Non-headline items in profit – discontinued operations		1,662	(95)
Profit/(loss) for the year – non headline items for continuing and
discontinued operations		1,545	(120)

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

The carrying value of businesses held for sale have been impaired to their fair value less costs to

sell.

The £11m of impairment losses recognised in FY2026 relate to certain Flex-Tek’s general

industrial businesses,

the £30m impairment loss recognised in FY2025 relates to Interconnect’s US

sub-systems business.

In FY2025 £8m of separation costs were incurred on the Smiths Interconnect sale. These costs have

been reported as non-headline as they were both material and non-recurring.

Detection restructuring and separation costs amounted to £8m (FY2025: £16m); this represents the

incremental costs incurred by the Group to sell/demerge the Smiths Detection business. These

costs have been reported as non-headline as the total cost of the project is both material and

non-recurring.

Acquisition related intangible asset amortisation costs of £6m (FY2025: £23m) were recognised in

the current period. This is considered to be a non-headline item on the basis that these charges

result from acquisition accounting and do not relate to current trading activity.

In FY2025, following a balance sheet investigation at a stand-alone Flex-Tek general industrial

business, a £15m impairment charge was recognised. This was recognised as a non-headline item

as the charge was a significant non-recurring item that related to multiple prior years.

The £5m (FY2025: £2m) environmental remediation provision relate to a site contamination within a

Flex-Tek general industrial business. The provision was considered to be non-headline as it was due

to a legacy site contamination, that arose prior to the Smiths Group ownership, and does not relate

to current trading activity.

The £3m non-headline taxation credit (FY2025: £nil) comprises credits for the non-headline items

above.

4. Net finance costs


			Year ended
		Year ended	31 July 2025
		31 July 2026	represented*
	Notes	£m	£m
Interest income		44	35
Interest expense:
– bank loans and overdrafts, including associated fees		(48)	(44)
– other loans		(27)	(12)
– interest on leases		(6)	(5)
– interest on uncertain tax provisions		1	(1)
Interest expense		(80)	(62)
Headline net finance costs		(36)	(27)
Other financing (losses)/gains:
– valuation movements on fair value hedged debt		22	(13)
– valuation movements on fair value derivatives		(23)	15
– foreign exchange and ineffectiveness on net investment hedges		(4)	(3)
– unwind of discount on provisions and other payables	3	(8)	(10)
Other non-headline financing losses		(13)	(11)
Other non-headline finance cost items:
– release of interest payment on overdue VAT		–	4
– other finance income – Interest on retirement benefits	8	5	4
Other non-headline finance cost items		5	8
Net finance costs		(44)	(30)

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

127

NOTES TO THE ACCOUNTS

CONTINUED

5. Earnings per share

Basic earnings per share are calculated by dividing the profit for the year attributable to equity

shareholders of the Company by the average number of ordinary shares in issue during the year.


		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
	£m	£m
Profit attributable to equity shareholders for the year:
– continuing	155	252
– discontinued	1,815	38
Total	1,970	290


	Year ended	Year ended
	31 July 2026	31 July 2025
	Number of shares	Number of shares
Number of shares in issue, net of shares held in Employee Benefit Trust:
Weighted average number for basic earnings per share	313,252,549	338,390,299
Adjustment for potentially dilutive shares	1,307,740	1,576,039
Weighted average number for diluted earnings per share	314,560,289	339,966,338

Nil options (FY2025: nil) were excluded from this calculation because their effect was anti-dilutive.


		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
	pence	pence
Statutory earnings per share total – basic	628.8p	85.7p
Statutory earnings per share total – diluted	626.2p	85.3p
Statutory earnings per share continuing operations – basic	49.5p	74.5p
Statutory earnings per share continuing operations – diluted	49.3p	74.1p
Statutory earnings per share discontinued operations – basic	579.3p	11.2p
Statutory earnings per share discontinued operations – diluted	576.9p	11.2p

A reconciliation of statutory and headline earnings per share is as follows:


	Year ended 31 July 2026			Year ended 31 July 2025 – represented*
		Basic EPS	Diluted EPS		Basic EPS	Diluted EPS
	£m	(p)	(p)	£m	(p)	(p)
Total profit attributable to equity
shareholders of the Parent Company	1,970	628.8p	626.2p	290	85.7p	85.3p
Exclude: Non-headline items (note 3)	(1,545)			120
Headline earnings per share	425	135.7p	135.1p	410	121.2p	120.6p
Profit from continuing operations
attributable to equity shareholders of the
Parent Company	155	49.5p	49.3p	252	74.5p	74.1p
Exclude: Non-headline items (note 3)	117			25
Headline earnings per share –
continuing operations	272	86.8p	86.5p	277	81.9p	81.5p

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and Flex-Tek general industrial businesses as discontinued operations.

6. Taxation

This note only provides information about corporate income taxes under IFRS. Smiths companies

operate in over 50 countries across the world. They pay and collect many different taxes in addition

to corporate income taxes including: payroll taxes; value added and sales taxes; property taxes;

product-specific taxes; and environmental taxes. The costs associated with these other taxes are

included in profit before tax.


		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
	£m	£m
The taxation charge in the consolidated income statement for the year comprises:
Continuing operations
Current taxation:
– current income tax charge	81	78
– deferred taxation	7	(15)
Total taxation expense – continuing operations	88	63
Discontinued operations
Current taxation:
– current income tax charge	37	39
– deferred taxation	17	16
Total taxation expense – discontinued operations	54	55
		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
	£m	£m
Analysed as:
Headline taxation expense	146	137
Non-headline taxation credit	(4)	(19)
Total taxation expense in the consolidated income statement	142	118

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.


	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Tax on items credited to equity
Deferred tax:
– retirement benefit schemes	(14)	–
– share based payments	(2)	(1)
Total taxation on items credited to equity	(16)	(1)

128

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Current taxation liabilities


	Current tax
	£m
At 31 July 2024	(46)
Charge to income statement – continuing operations*	(78)
Charge to income statement – discontinued operations*	(39)
Tax paid	113
Transfer to held for sale	4
At 31 July 2025	(46)
Comprising:
Current tax receivable	20
Current tax payable within one year	(66)
At 31 July 2025	(46)
Charge to income statement – continuing operations	(81)
Charge to income statement – discontinued operations	(37)
Tax paid	108
Transfer to held for sale	30
At 31 July 2026	(26)
Comprising:
Current tax receivable	9
Current tax payable within one year	(35)
At 31 July 2026	(26)

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

Total provisions for tax liabilities amount to £16m relating to current tax

(FY2025: total £35m,

current tax £30m). The majority of which relates to the risk of challenge from tax authorities to the

geographic allocation of profits across the Group.

In addition to the risks provided for, the Group faces a variety of other tax risks, which result from

operating in a complex global environment, including the ongoing reform of both international and

domestic tax rules, new and ongoing tax audits in the Group’s larger markets and the challenge to

fulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of

the Group’s global operations.

The Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24 months

for which provisions are recognised based on best estimates and management’s judgements

concerning the ultimate outcome of the audit. Due to the uncertainty associated with such items,

it is possible at a future date, on conclusion of open tax matters, the final outcome may vary

significantly from the amounts noted above.

Reconciliation of the tax charge

The headline tax charge for the year of £89m (FY2025: £82m) represents an effective rate of 24.4%

(FY2025: 22.7%).

The tax charge on the profit for the year for continuing operations is different from the standard rate

of corporation tax in the UK, with a rate for FY2026 of 25.0% (FY2025: 25.0%). The differences are

reconciled as follows:


	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Profit before taxation	245	317
Notional taxation expense at UK corporate rate of 25.0% (FY2025: 25.0%)	61	79
Different tax rates on non-UK profits and losses	(4)	(8)
Non-deductible expenses and other charges	24	13
Tax credits and non-taxable income	(9)	(14)
Non-headline UK deferred tax asset recognition adjustment	16	(7)
Other adjustments to unrecognised deferred tax	–	(1)
Prior year true-up	–	1
Taxation on continuing operations	88	63
Taxation on discontinued operations	54	55
Total taxation expense in the consolidated income statement	142	118
Comprising:
Taxation on headline profit	89	82
Non-headline taxation items:
– Tax credit on non-headline loss	(17)	(12)
– UK deferred tax asset recognition adjustment	16	(7)
Taxation on non-headline items	(1)	(19)
Taxation on discontinued operations	54	55
Total taxation expense in the consolidated income statement	142	118

The table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual

total tax charge. As a group operating in multiple countries, the actual tax rates applicable to profits

in those countries are different from the UK tax rate. The impact is shown above as different tax

rates on non-UK profits and losses. The Group’s worldwide business leads to the consideration of a

number of important factors which may affect future tax charges, such as: the levels and mix of

profitability in different jurisdictions, transfer pricing regulations, tax rates imposed and tax regime

reforms, acquisitions, disposals, restructuring activities, and settlements or agreements with

tax authorities.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

129

NOTES TO THE ACCOUNTS

CONTINUED

Deferred taxation assets/(liabilities)

	Property, plant,
	equipment and		Losses
	intangible	Employment	carried
	assets	benefits	forward	Provisions	Other	Total
	£m	£m	£m	£m	£m	£m
At 31 July 2024	(79)	(12)	65	71	17	62
Reallocations	6	–	(4)	4	(6)	–
Charge to income statement –
continuing operations	5	(1)	(3)	(6)	4	(1)
Credit to equity	–	1	–	–	–	1
Acquisitions in the year	(9)	–	–	–	–	(9)
Foreign exchange rate
movements	1	–	(1)	(3)	–	(3)
Reclassified as held for sale	18	–	(9)	(2)	(2)	5
At 31 July 2025	(58)	(12)	48	64	13	55
Comprising:
Deferred tax assets	(12)	(15)	28	60	37	98
Deferred tax liabilities	(46)	3	20	4	(24)	(43)
At 31 July 2025	(58)	(12)	48	64	13	55
Charge to income statement –
continuing operations	1	11	(23)	(7)	11	(7)
Credit to equity	–	16	–	–	–	16
Foreign exchange rate
movements	–	–	–	(1)	–	(1)
Reclassified as held for sale,
subsequently disposed	28	(4)	(21)	(4)	(7)	(8)
At 31 July 2026	(29)	11	4	52	17	55
Comprising:
Deferred tax assets	(20)	11	4	51	32	78
Deferred tax liabilities	(9)	–	–	1	(15)	(23)
At 31 July 2026	(29)	11	4	52	17	55

Of the amounts included within ‘Other’, shown in the above table, as at 31 July 2026, amounts

relating to tax on unremitted earnings were £14m (FY2025: £22m). The aggregate amount of

temporary differences associated with investments in subsidiaries for which deferred tax liabilities

have not been recognised is immaterial.

The deferred tax asset relating to losses has been recognised on the basis of strong evidence of

future taxable profits against which the unutilised tax losses can be relieved or it is probable that

they will be recovered against the reversal of deferred tax liabilities. The closing net deferred tax

asset balance attributable

to UK activities and included in the balance at 31 July 2026 amounted to

£nil (FY2025: £nil). Deferred tax attributable to provisions includes £37m (FY2025: £46m) relating to

John Crane Inc litigation provision, and £7m (FY2025: £6m) relating to Titeflex Corporation. See note

23 for additional information on provisions.

Losses with unrecognised deferred tax

The Group does not recognise deferred tax on losses of £517m (FY2025: £572m).

The expiry date of operating losses carried forward is dependent upon the law of the various

territories in which the losses arise. A summary of expiry dates in respect of which deferred tax has

not been recognised is set out below:

	2026	Expiry of	2025	Expiry of
	£m	losses	£m	losses
Unrestricted losses – operating losses	517	No expiry	572	No expiry

Tax losses for which no deferred tax asset is recognised decreased by £55m (FY2025: £31m

decrease). The reduction was primarily driven by the disposal of the Smiths Detection and Smiths

Interconnect businesses, which reduced unrecognised losses by £163m. This was partially offset by

a £93m increase in unrecognised UK tax losses following the buy-in of the Smiths Industries

Pension Scheme (SIPS). The buy-in resulted in the related pension deferred tax position changing

from a deferred tax liability to a deferred tax asset, which has not been recognised.

Developments in the Group tax position

The Pillar Two (global minimum taxes legislation) charge borne by Smiths Group does not have a

material impact on the Group’s FY2026 ETR.

130

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

7. Employees


	Year ended 31 July 2026			Year ended 31 July 2025 - represented*
	Continuing	Discontinued		Continuing	Discontinued
	Operations	Operations	Total	Operations	Operations	Total
	£m	£m	£m	£m	£m	£m
Staff costs during the period
Wages and salaries	491	313	804	486	379	865
Social security	66	38	104	63	43	106
Share-based payment (note 9)	19	5	24	17	4	21
Pension costs (including defined
contribution schemes) (note 8)	24	13	37	22	13	35
Total	600	369	969	588	439	1,027

* The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations.

The average number of persons employed, including employees on permanent, fixed term and

temporary contracts, rounded to the nearest 50 employees, was:


		Year ended
	Year ended	31 July 2025
	31 July 2026	represented*
John Crane	6,300	6,250
Flex-Tek	3,650	3,700
Corporate (including central/shared IT services)	350	350
Continuing operations	10,300	10,300
Smiths Detection	3,300	3,500
Smiths Interconnect	1,650	2,650
Flex-Tek General Industrial	400	500
Total	15,650	16,950

Key management

The key management of the Group comprises Smiths Group plc Board Directors and Executive

Committee members. Their aggregate compensation is shown below. Further information for the

Executive Directors is available in the single figure remuneration table on page 81. Further

information for the Non-executive Directors is available in the single figure remuneration table on

page 88.


	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Key management compensation
Salaries and short-term employee benefits	12.2	16.3
Cost of retirement benefits	0.4	0.6
Cost of share-based incentive plans	10.1	9.4

No member of key management had any material interest during the period in a contract of

significance (other than a service contract or a qualifying third-party indemnity provision) with the

Company or any of its subsidiaries.

Options and awards held at the end of the period by key management in respect of the Company’s

share-based incentive plans were:


	Year ended 31 July 2026		Year ended 31 July 2025
		Weighted		Weighted
	Number of	average	Number of	average
	instruments	exercise	instruments	exercise
	’000	price	’000	price
LTIP	1,450		1,375
SAYE	7	£15.00	10	£13.09

Related party transactions

The only related party transactions in FY2026 were key management compensation

(FY2025: key management compensation).

8. Retirement benefits

The Group provides retirement benefits to employees in a number of countries. This includes

defined benefit and defined contribution plans and, mainly in the United Kingdom (UK) and United

States of America (US), post-retirement healthcare.

Defined contribution plans

The Group operates defined contribution plans across many countries. In the UK a defined

contribution plan has been offered since the closure of the UK defined benefit pension plans. In the

US a 401(k) defined contribution plan operates. The total expense recognised in the consolidated

income statement in respect of all these plans was £35m (FY2025: £33m).

Defined benefit and post-retirement healthcare plans

The principal defined benefit pension plans are in the UK and in the US and these have been closed

so that no future benefits are accrued.

For all schemes, pension costs are assessed in accordance with the advice of independent,

professionally qualified actuaries. These valuations have been updated by independent qualified

actuaries in order to assess the liabilities of the schemes as at 31 July 2026. Contributions to the

schemes are made on the advice of the actuaries, in accordance with local funding requirements.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

131

NOTES TO THE ACCOUNTS

CONTINUED

The changes in the present value of the net pension asset in the period were:

	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
At beginning of period	32	29
Current service cost	(2)	(2)
Headline scheme administration costs	(2)	(2)
Non-headline scheme administration costs	(6)	(4)
Past service cost, curtailments, settlements	(57)	–
Finance income – retirement benefits – continuing operations	5	3
Finance income – retirement benefits – discontinued operations	(1)	–
Contributions by employer	15	11
Actuarial losses	(70)	(3)
Retirement benefit obligations extinguished on disposal	38	–
Net retirement benefit (liability)/asset	(48)	32

UK pension schemes

The Group’s funded UK pension schemes are subject to a statutory funding objective, as set out in

UK pension legislation. Scheme trustees need to obtain regular actuarial valuations to assess the

scheme against this funding objective. The trustees and sponsoring companies need to agree

funding plans to improve the position of a scheme when it is below the acceptable funding level.

The UK Pensions Regulator has extensive powers to protect the benefits of members, promote good

administration and reduce the risk of situations arising which may require compensation to be paid

from the Pension Protection Fund. These include imposing a schedule of contributions or the

calculation of the technical provisions, where a trustee and company fail to agree appropriate

calculations.

Smiths Industries Pension Scheme (SIPS)

This scheme was closed to future accrual effective 1 November 2009. SIPS provides index-linked (to

applicable caps) pension benefits based on final earnings at date of closure. SIPS is governed by a

corporate trustee (S.I. Pension Trustees Limited, a wholly owned subsidiary of Smiths Group plc).

The board of trustee directors currently comprises three Company-nominated trustees and three

member-nominated trustees, with an independent chairman selected by Smiths Group plc. Trustee

directors are responsible for the management, administration, funding and investment strategy of

the scheme.

In July 2026, the SIPS trustee completed a deal to secure its remaining uninsured pension liabilities

by way of a bulk annuity buy-in with M&G. This means all of the scheme’s liabilities are insured via

five buy-in policies. The final buy-in has been secured with an intention to fully buyout the scheme

as soon as reasonably practical. Consequently, the income statement recognises a settlement loss

of £6m in relation to the buy-in. In terms agreed between the Group and the SIPS trustee prior to the

transaction, when SIPS converts all of its buy-in policies to buy-out policies and subsequently

winds-up, the Group expects the trustee to use a portion of any surplus remaining, after the costs of

buying-out and winding-up the scheme have been met, to improve member benefits. A past service

cost of £52m has been recognised for this in the income statement. A final decision on the

distribution of surplus will be taken at the appropriate time as part of the winding-up process and,

as the Group does not have an unconditional right to a refund in this scenario, the Group has placed

an economic benefit value of zero on the SIPS surplus from 1 July 2026.

As SIPS currently retains the legal obligation to pay all scheme benefits, SIPS liabilities remain part

of the retirement benefit obligations on the balance sheet alongside the corresponding buy-in

assets. These liabilities and assets will be de-recognised at the point the buy-in policies are

converted to buy-outs and the legal obligation for payment of benefits is transferred to the relevant

insurers.

The most recent actuarial valuation of this scheme has been performed using the Projected Unit

Method as at 31 March 2023. The valuation showed a surplus of £26m on the Technical Provisions

funding basis at the valuation date and the funding position has improved since then. As part of the

valuation agreement, no contributions are currently being paid to SIPS and the Group’s current

expectation is that contributions will not recommence. The next actuarial valuation is due as at

31 March 2026.

The duration of SIPS liabilities is around 18 years (FY2025: 19 years) for active deferred members,

15 years (FY2025: 16 years) for deferred members and 8 years (FY2025: 9 years) for pensioners

and dependants.

TI Group Pension Scheme (TIGPS)

This scheme was closed to future accrual effective 1 November 2009. TIGPS is governed by a

corporate trustee (TI Pension Trustee Limited, an independent company). The board of trustee

directors comprises three Company-nominated trustees and four member-nominated trustees,

with an independent trustee director selected by the trustee.

In May 2026 the TIGPS trustee converted the existing buy-in policies to buy-out policies. The

liabilities and corresponding assets of TIGPS of £778m have therefore been de-recognised from 11

May 2026, as the legal obligation for payment of benefits transferred to the relevant insurers from

that date.

The most recent actuarial valuation of this scheme has been performed using the Projected Unit

Method as at 5 April 2023. Given TIGPS’s circumstances, the Group’s current expectation is that no

further contributions to TIGPS will be required. No further actuarial valuations are expected to be

carried out and TIGPS is expected to be wound-up in FY2027, with any cash surplus remaining, after

the costs of winding-up the scheme have been met, being returned to the Group. The Group

currently has no expectation of receiving a refund from the scheme and has placed an economic

benefit value of zero on the TIGPS surplus from 10 June 2022.

US pension plans

The valuations of the principal US pension and post-retirement healthcare plans were performed

using census data at 1 January 2026.

The pension plans were closed with effect from 30 April 2009 and benefits were calculated as at that

date and are not revalued. Governance of the US pension plans is overseen by a Settlor Committee

appointed by Smiths Group Services Corp, a wholly owned subsidiary of the Group.

132

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

The duration of the liabilities for the largest US plan is around 13 years (FY2025: 14 years) for active

deferred members, 12 years (FY2025: 13 years) for deferred members and 9 years (FY2025: 9 years)

for pensioners and dependants.

Risk management

In respect of uninsured liabilities, the pensions schemes are exposed to risks that:

–

Investment returns are below expectations, leaving the schemes with insufficient assets in

future to pay all their pension obligations;

–

Members and dependants live longer than expected, increasing the value of the pensions which

the schemes have to pay;

–

Inflation rates are higher than expected, causing amounts payable under index-linked pensions

to be higher than expected; and

–

Increased contributions are required to meet funding targets if lower interest rates increase

the current value of liabilities.

These risks are managed separately for each pension scheme. However, the Group has adopted a

common approach of closing defined benefit schemes to cap members’ entitlements and of

supporting trustees in adopting investment strategies which aim to hedge the value of assets

against changes in the value of liabilities caused by changes in interest and inflation rates.

TIGPS

The legal obligation for payment of TIGPS benefits transferred to the relevant insurers from 11 May

2026, eliminating all investment return, longevity, inflation and funding risks from that date.

SIPS

SIPS has covered roughly 100% of its current liabilities with matching annuities, eliminating

investment return, longevity, inflation and funding risks in respect of those liabilities.

The critical estimates and principal assumptions used in updating the valuations are set out below:

	2026	2026	2026	2025	2025	2025
	UK	US	Other	UK	US	Other
Rate of increase in salaries	n/a	n/a	1.8%	n/a	n/a	0.2%
Rate of increase for active deferred
members	4.3%	n/a	n/a	4.1%	n/a	n/a
Rate of increase in pensions in payment	3.3%	n/a	1.6%	3.1%	n/a	1.8%
Rate of increase in deferred pensions	3.3%	n/a	n/a	3.1%	n/a	n/a
Discount rate	6.3%	5.9%	2.9%	5.6%	5.5%	2.6%
Inflation rate	3.3%	n/a	1.4%	3.1%	n/a	0.9%

The assumptions used in calculating the costs and obligations of the Group’s defined benefit pension

plans are set by the Group after consultation with independent professionally qualified actuaries.

The assumptions used are estimates chosen from a range of possible actuarial assumptions which,

due to the timescale covered, may not necessarily occur in practice. For countries outside the UK

and the US, assumptions are disclosed as a weighted average.

Inflation rate assumptions

The RPI inflation assumption of 3.3% has been derived as the cashflow-weighted breakeven

inflation rate from LCP’s Gilt Yield Curve, with an Inflation Risk Premium of 0.1% p.a. (FY2025: 0.1%).

This is a change in approach from FY2025, where inflation was derived from Aon’s Gilt Prices Only

Yield Curve.

The Government’s response to its consultation on RPI reform was published on 25 November 2020,

and strongly implied that RPI will become aligned with CPI-H from 2030. No specific allowance

(beyond anything already priced into markets) has been factored into the RPI assumptions for

potential changes. The assumption for the long-term gap between RPI and CPI is 0.4% p.a.

(FY2025: 0.4%) reflecting the Group’s view on the market pricing of this gap over the lifetime of the

UK schemes’ liabilities, i.e., 0.9% p.a. (FY2025: 0.9%) pre-2030 and 0.1% p.a. post-2030 (FY2025: 0.1%).

Discount rate assumptions

The UK schemes use a discount rate based on the annualised yield on the LCP Accounting Curve

and the expected cashflows for each scheme. This is a change in approach from FY2025, where the

Aon GBP Single Agency Curve was adopted using notional cashflows.

The US plan uses a discount rate based on the annualised yield derived from Willis Towers Watson’s

RATE:Link (10th – 90th) model using the Plan’s expected cashflows.

Mortality assumptions

The mortality assumptions used in the principal UK schemes are based on the ‘SAPS S3’ birth

year tables with relevant scaling factors based on the recent experience of the schemes. The

assumption allows for future improvements in life expectancy in line with the 2025 CMI projections,

with a smoothing factor of 7.0 and ‘A’ parameter of 0.5% and blended to a long-term rate of 1.5%.

The latest CMI projections incorporate allowance for the impact of COVID-19 through a new half-life

parameter of 1.0, which allows for excess deaths due to the pandemic to halve year-on-year. In

FY2025, allowance for the impact of COVID-19 was made by placing a weighting of 0% on 2020 and

2021 mortality data and a weighting of 15% on 2022 and 2023 mortality data.

The mortality assumptions used in the principal US plans are based on generational mortality using

the latest Pri-2012 sex-distinct, employee/non-disabled annuitant table, with a 2012 base year,

projected forward generationally with the latest MP-2021 mortality scale. No explicit adjustment

has been made to mortality assumptions in respect of COVID-19. The impact of COVID-19 remains

uncertain and further data studies are underway to better predict the impact on future mortality.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

133

NOTES TO THE ACCOUNTS

CONTINUED

	UK schemes
	Male	Female	Male	Female
Expected further years of life	31 July 2026	31 July 2026	31 July 2025	31 July 2025
Member who retires next year at age 65	23	25	22	24
Member, currently 45, when they retire in 20 years’ time	24	26	23	25

	US schemes
	Male	Female	Male	Female
Expected further years of life	31 July 2026	31 July 2026	31 July 2025	31 July 2025
Member who retires next year at age 65	21	23	21	22
Member, currently 45, when they retire in 20 years’ time	22	24	22	24

Sensitivity

Sensitivities in respect of the key assumptions used to measure the principal pension schemes as

at 31 July 2026 are set out below. These sensitivities show the hypothetical impact of a change in

each of the listed assumptions in isolation, with the exception of the sensitivity to inflation which

incorporates the impact of certain correlating assumptions. In practice, such assumptions rarely

change in isolation.

	Profit before	Increase/	(Increase)/	Profit before	Increase/	(Increase)/
	tax	(decrease) in	decrease in	tax	(decrease) in	decrease in
	for year	scheme	scheme	for year	scheme	scheme
	ended	assets	liabilities	ended	assets	liabilities
	31 July 2026	31 July 2026	31 July 2026	31 July 2025	31 July 2025	31 July 2025
	£m	£m	£m	£m	£m	£m
Rate of mortality – one year
increase in life expectancy	–	56	(62)	(2)	53	(90)
Rate of mortality – one year
decrease in life expectancy	–	(56)	62	2	(55)	93
Rate of inflation – 0.25% increase	–	17	(17)	(1)	19	(37)
Discount rate – 0.25% increase	–	(24)	28	2	(28)	56
Market value of scheme assets –
2.5% increase	–	7	–	2	28	–

The effect on profit before tax reflects the impact of current service cost and net interest cost.

The value of the scheme assets is affected by changes in mortality rates, inflation and discounting

because they affect the carrying value of the insurance assets.

Asset valuation

The pension schemes hold assets in a variety of pooled funds, in which the underlying assets

typically are invested in credit and cash assets. These funds are valued. The price of the funds is

set by administrators/custodians employed by the investment managers and based on the value

of the underlying assets held in the funds. Prices are generally updated daily, weekly or quarterly

depending upon the frequency of the fund’s dealing.

Bonds are valued using observable broker quotes. Gilt repurchase obligations are valued by the

relevant manager, which derives the value using an industry recognised model with observable inputs.

Total return, interest and inflation swaps and forward FX contracts are bilateral agreements

between counterparties and do not have observable market prices. These derivative contracts are

valued using observable inputs.

Insured liabilities comprise annuity policies that match all or part of the scheme obligation to

identified groups of members. These assets are valued by an external qualified actuary at the

actuarial valuation of the corresponding liability, reflecting this matching relationship.

The insurance policies are treated as qualifying insurance policies as none of the insurers are

related parties of the Group, and the proceeds of the policies can only be used to pay or fund

employee benefits for the respective schemes, are not available to the Group’s creditors and cannot

be paid to the Group.

Retirement benefit plan assets

	31 July 2026 – £m
	UK	US	Other
	schemes	schemes	countries	Total
Cash and cash equivalents	68	19	2	89
Pooled funds:
– Pooled equity	–	22	8	30
– Pooled Diversified Growth	–	–	12	12
Corporate bonds	–	68	–	68
Government bonds/LDI	43	69	1	113
Insured liabilities	1,102	–	–	1,102
Total market value	1,213	178	23	1,414

	31 July 2025 – £m
	UK	US	Other
	schemes	schemes	countries	Total
Cash and cash equivalents	30	20	1	51
Pooled funds:
– Pooled equity	–	21	5	26
– Pooled Diversified Growth	–	–	13	13
– Pooled credit	340	–	–	340
Corporate bonds	131	50	–	181
Government bonds/LDI	436	89	3	528
Insured liabilities	1,199	–	–	1,199
Total market value	2,136	180	22	2,338

The UK Government bonds/LDI portfolios contain £43m (FY2025: £763m) of UK Government bonds

(gilts), £nil (FY2025: £341m) of gilt repurchase obligations and £nil of interest and inflation swaps

(FY2025: £15m) and forward FX contracts with a net obligation of £nil (FY2025: £1m). These assets

134

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

were primarily held by SIPS to hedge against interest rate, inflation and foreign currency risks.

Following the buy-in on 1 July 2026, these risks have been largely eliminated and so significant

hedging assets are no longer required. The pooled funds and insured liabilities are unquoted. The

scheme assets do not include any property occupied by, or other assets used by, the Group.

The asset valuations are effective as at the end of the period, consistent with the calculations

determining the obligations.

The Group acknowledges that responsibility for the effective management of the schemes’

assets lies primarily with the trustees, but also accepts that any risks inherent in the investment

strategy, including ESG and climate risk, are ultimately underwritten by the Group. Consequently,

the Group ensures that the trustees’ investment strategy and statements of investment principles

are compatible with the Group’s wider sustainability strategy.

The legal obligation for payment of TIGPS benefits transferred to the relevant insurers from 11 May

2026, eliminating all investment risks, including ESG and climate risk, from that date.

For SIPS, where all benefits are now secured by way of annuity purchase, all investment risks

including ESG and climate risk, have effectively now been eliminated.

Present value of funded scheme liabilities and assets for the main UK and US schemes

	31 July 2026 – £m
			US
	SIPS	TIGPS	schemes
Present value of funded scheme liabilities:
– Active deferred members	(10)	–	(18)
– Deferred members	(333)	–	(67)
– Pensioners	(808)	–	(91)
Present value of funded scheme liabilities	(1,151)	–	(176)
Market value of scheme assets	1,210	3	178
Surplus restriction	(59)	(3)	–
Surplus/(deficit)	–	–	2

	31 July 2025 – £m
			US
	SIPS	TIGPS	schemes
Present value of funded scheme liabilities:
– Active deferred members	(12)	(8)	(26)
– Deferred members	(332)	(260)	(71)
– Pensioners	(841)	(544)	(91)
Present value of funded scheme liabilities	(1,185)	(812)	(188)
Market value of scheme assets	1,313	823	180
Surplus restriction	–	(11)	–
Surplus/(deficit)	128	–	(8)

Net retirement benefit obligations

	31 July 2026 – £m
	UK	US	Other
	schemes	schemes	countries	Total
Market value of scheme assets	1,213	178	23	1,414
Present value of funded scheme liabilities	(1,151)	(176)	(29)	(1,356)
Surplus restriction	(62)	–	–	(62)
Surplus/(deficit)	–	2	(6)	(4)
Unfunded pension plans	(32)	(5)	(4)	(41)
Post-retirement healthcare	(3)	–	–	(3)
Present value of unfunded obligations	(35)	(5)	(4)	(44)
Net pension asset/(liability)	(35)	(3)	(10)	(48)
Comprising:
Retirement benefit assets	–	2	–	2
Retirement benefit liabilities	(35)	(5)	(10)	(50)
Net pension asset/(liability)	(35)	(3)	(10)	(48)

	31 July 2025 – £m
	UK	US	Other
	schemes	schemes	countries	Total
Market value of scheme assets	2,136	180	22	2,338
Present value of funded scheme liabilities	(1,997)	(188)	(28)	(2,213)
Surplus restriction	(11)	–	–	(11)
Surplus/(deficit)	128	(8)	(6)	114
Unfunded pension plans	(33)	(5)	(41)	(79)
Post-retirement healthcare	(2)	(1)	–	(3)
Present value of unfunded obligations	(35)	(6)	(41)	(82)
Net pension asset/(liability)	93	(14)	(47)	32
Comprising:
Retirement benefit assets	128	–	–	128
Retirement benefit liabilities	(35)	(14)	(47)	(96)
Net pension asset/(liability)	93	(14)	(47)	32

Where any individual scheme shows a recoverable surplus under IAS 19, this is disclosed on the

balance sheet as a retirement benefit asset. The IAS 19 surplus of any one scheme is not available to

fund the IAS 19 deficit of another scheme. The retirement benefit asset disclosed arises from the

rights of the employers to recover the surplus at the end of the life of the scheme, i.e., when the last

beneficiary’s obligation has been met.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

135

NOTES TO THE ACCOUNTS

CONTINUED

Amounts recognised in the consolidated income statement

	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Amounts charged to operating profit
Current service cost	2	2
Past service cost, curtailments, settlements	57	–
Headline scheme administration costs	2	2
Non-headline scheme administration costs	6	4
	67	8
The operating cost is charged as follows:
Headline administrative expenses	4	4
Non-headline administrative expenses	63	4
	67	8
Amounts credited to finance costs
Non-headline other finance income – retirement benefits	(5)	(3)

Amounts recognised directly in the consolidated statement of comprehensive income

	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Re-measurements of retirement defined benefit assets and liabilities
Difference between interest credit and return on assets	(67)	(197)
Experience gains/(losses) on scheme liabilities	(24)	25
Actuarial gains arising from changes in demographic assumptions	(21)	–
Actuarial gains/(losses) arising from changes in financial assumptions	93	169
Movement in surplus restriction	(51)	–
	(70)	(3)

Changes in present value of funded scheme assets

	31 July 2026 – £m
	UK	US	Other
	schemes	schemes	countries	Total
At beginning of period	2,136	180	22	2,338
Foreign exchange rate movements	–	(3)	–	(3)
Interest on assets	150	10	–	160
Actuarial movement on scheme assets	(110)	(3)	1	(112)
Employer contributions	–	10	–	10
Scheme administration costs	(8)	(1)	–	(9)
Assets distributed on settlements	(784)	–	–	(784)
Benefits paid	(171)	(15)	–	(186)
At end of period	1,213	178	23	1,414

	31 July 2025 – £m
	UK	US	Other
	schemes	schemes	countries	Total
At beginning of period	2,372	190	21	2,583
Foreign exchange rate movements	–	(6)	–	(6)
Interest on assets	115	9	1	125
Actuarial movement on scheme assets	(192)	(6)	1	(197)
Employer contributions	–	5	–	5
Scheme administration costs	(5)	(1)	–	(6)
Benefits paid	(154)	(11)	(1)	(166)
At end of period	2,136	180	22	2,338

Changes in present value of funded defined benefit obligations

	31 July 2026 – £m
	UK	US	Other
	schemes	schemes	countries	Total
At beginning of period	(1,997)	(188)	(28)	(2,213)
Foreign exchange rate movements	–	3	–	3
Past service costs	(51)	–	–	(51)
Interest on obligations	(141)	(10)	(2)	(153)
Actuarial movement on liabilities	89	4	(1)	92
Liabilities extinguished on settlements	778	–	–	778
Benefits paid	171	15	2	188
At end of period	(1,151)	(176)	(29)	(1,356)

	31 July 2025 – £m
	UK	US	Other
	schemes	schemes	countries	Total
At beginning of period	(2,229)	(201)	(26)	(2,456)
Foreign exchange rate movements	–	6	–	6
Past service costs	–	–	–	–
Interest on obligations	(107)	(10)	(2)	(119)
Actuarial movement on liabilities	185	6	(1)	190
Benefits paid	154	11	1	166
At end of period	(1,997)	(188)	(28)	(2,213)

136

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Changes in present value of unfunded defined benefit pensions and post-retirement healthcare plans


	Assets		Obligations
	Year ended	Year ended	Year ended	Year ended
	31 July 2026	31 July 2025	31 July 2026	31 July 2025
	£m	£m	£m	£m
At beginning of period	–	–	(82)	(87)
Current service cost	–	–	(2)	(2)
Interest on obligations	–	–	(3)	(3)
Actuarial movement	–	–	1	4
Employer contributions	4	6	–	–
Liabilities extinguished on disposal	–	–	38	–
Benefits paid	(4)	(6)	4	6
At end of period	–	–	(44)	(82)

The £38m of liabilities extinguished on disposal represent the retirement benefit obligations of

the

Smiths Interconnect and Smiths Detection businesses that were sold during the financial year.

See

note 28 for further information.

Changes in the effect of the asset ceiling over the year


	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Irrecoverable asset at beginning of period	(11)	(11)
Actuarial movement on scheme assets	(51)	–
At end of period	(62)	(11)

Cash contributions

Company contributions to the defined benefit pension plans and post-retirement healthcare plans

totalled £15m (FY2025: £11m). This comprised an additional £10m contribution to the US funded

scheme (FY2025: £5m) and £5m (FY2025: £6m) on providing benefits under unfunded defined

benefit pension and post-retirement healthcare plans.

In FY2027, cash contributions to the Group’s schemes are expected to be up to £10m in total.

Recent legal rulings

In July 2024, the UK Court of Appeal upheld the High Court’s June 2023 ruling in the Virgin Media v

NTL Pension Trustees II court case relating to section 37 of the Pension Schemes Act 1993 and

amendments to benefits for contracted-out defined benefit schemes, such as SIPS and TIGPS. The

ruling confirmed the need for an actuarial confirmation where such schemes made changes to

benefits between 6 April 1997 and 5 April 2016, and any amendments were void without the

appropriate confirmation. The Government introduced new legislation in the Pensions Act 2026 that

gives affected pension schemes the ability to retrospectively obtain any necessary actuarial

confirmations that historic benefit changes met the applicable standards. The Group does not

expect this ruling to have any impact on its defined benefit obligations and SIPS will continue to be

administered on the current basis.

9. Employee share schemes

The Group operates share schemes and plans for the benefit of employees. The nature of the

principal schemes and plans, including general conditions, is set out below:

Long-Term Incentive Plan (LTIP)

The LTIP is a share plan under which an award over a capped number of shares will vest after the

end of a three-year performance period if performance conditions are met. LTIP awards are made

to selected senior executives, including the Executive Directors.

LTIP performance conditions

Each performance condition has a threshold below which no shares vest and a maximum

performance target at or above which the award vests in full. For performance between ‘threshold’

and ‘maximum’, awards vest on a straight-line sliding scale. The performance conditions are

assessed separately; so performance on one condition does not affect the vesting of the other

elements of the award. To the extent that the performance targets are not met over the three-year

performance period, awards lapse. There is no re-testing of the performance conditions.

LTIP awards have performance conditions relating to organic revenue growth, growth in headline

EPS, ROCE, free cash-flow and meeting ESG targets.

Restricted stock

Restricted stock is used by the Remuneration & People Committee, as a part of recruitment

strategy, to make awards in recognition of incentive arrangements forfeited on leaving a previous

employer and for retention purposes. If an award is considered appropriate, the award will

take account of relevant factors including the fair value of awards forfeited, any performance

conditions attached, the likelihood of those conditions being met and the proportion of the vesting

period remaining.

Save as you earn (SAYE)

The SAYE scheme is an HM Revenue & Customs approved all-employee savings-related share

option scheme which is open to all UK employees. Participants enter into a contract to save a

fixed amount per month of up to £500 in aggregate for three years and are granted an option

over shares at a fixed option price, set at a discount to market price at the date of invitation to

participate. The number of shares is determined by the monthly amount saved and the bonus paid

on maturity of the savings contract. Options granted under the SAYE scheme are not subject to any

performance conditions.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

137

NOTES TO THE ACCOUNTS

CONTINUED


Ordinary shares under option/	Long-term	Restricted	Save as you earn		Weighted average
award (’000)	incentive plans	stock	scheme	Total	exercise price
31 July 2024	4,389	114	685	5,188	£1.62
Granted	1,909	132	184	2,225	£1.06
Exercised	(968)	(52)	(100)	(1,120)	£1.03
Lapsed	(759)	–	(38)	(797)	£0.61
31 July 2025	4,571	194	731	5,496	£1.65
Granted	1,639	53	90	1,782	£1.08
Exercised	(1,780)	(32)	(135)	(1,947)	£0.78
Lapsed	(1,208)	(18)	(51)	(1,277)	£0.56
31 July 2026	3,222	197	635	4,054	£2.15

Options and awards were exercised on an irregular basis during the period. The average closing

share price over the financial year was 2,472p (FY2025: 1,900p). There has been no change to the

effective option price of any of the outstanding options during the period. The number of exercisable

share options at 31 July 2026 was nil (31 July 2025: nil).


		Weighted average		Weighted average
	Total shares under	remaining	Total shares under	remaining
	options/awards	contractual	options/awards	contractual
	at 31 July 2026	life at 31 July 2026	at 31 July 2025	life at 31 July 2025
Range of exercise prices	(’000)	(months)	(’000)	(months)
£0.00 – £2.00	3,419	16	4,765	17
£6.01 – £10.00	–	–	–	–
£10.01 – £12.00	635	21	731	26

For the purposes of valuing options to arrive at the share-based payment charge, the binomial

option pricing model has been used. The key assumptions used in the model were volatility of

25% to 20% (FY2025: 25% to 20%) and dividend yield of 1.9% (FY2025: 2.3%), based on historical

data, for the period corresponding with the vesting period of the option. These generated a weighted

average fair value for LTIP of £18.98 (FY2025: £15.66), and restricted stock of £13.75 (FY2025: £11.34).

Staff costs included £24m (FY2025: £22m) for share-based payments, of which £24m (FY2025:

£21m) related to equity-settled share-based payments. The amounts recognised in the consolidated

statement of changes in equity for the period were £26m (FY2025: £22m), inclusive of deferred tax.

10. Intangible assets


			Acquired	Software,
			intangibles	patents and
		Development	(see table	intellectual
	Goodwill	costs	below)	property	Total
	£m	£m	£m	£m	£m
Cost
At 31 July 2024	1,276	205	645	162	2,288
Foreign exchange rate movements	(16)	–	(17)	(2)	(35)
Business combinations	77	–	59	–	136
Additions	–	5	–	3	8
Disposals	–	–	–	(5)	(5)
Reclassified to assets held for sale	(282)	–	(98)	(24)	(404)
At 31 July 2025	1,055	210	589	134	1,988
Foreign exchange rate movements	(9)	(1)	(9)	(1)	(20)
Business combinations	38	–	109	–	147
Additions	–	–	–	3	3
Disposals	–	–	(7)	(3)	(10)
Reclassified to assets held for sale
subsequently disposed	(667)	(209)	(232)	(51)	(1,159)
At 31 July 2026	417	–	450	82	949
Amortisation and impairments
At 31 July 2024	64	124	453	126	767
Foreign exchange rate movements	–	–	(10)	(1)	(11)
Amortisation charge for the year	–	10	52	15	77
Impairment charge for the year	–	–	–	1	1
Disposals	–	–	–	(4)	(4)
Reclassified to assets held for sale	(25)	–	(82)	(19)	(126)
At 31 July 2025	39	134	413	118	704
Foreign exchange rate movements	–	(1)	(4)	(1)	(6)
Amortisation charge for the year	–	4	39	3	46
Disposals	–	–	(7)	(2)	(9)
Reclassified to assets held for sale
subsequently disposed	(39)	(137)	(186)	(48)	(410)
At 31 July 2026	–	–	255	70	325
Net book value at 31 July 2026	417	–	195	12	624
Net book value at 31 July 2025	1,016	76	176	16	1,284
Net book value at 31 July 2024	1,212	81	192	36	1,521

The charge associated with the amortisation of intangible assets is included in operating costs on

the consolidated income statement.

138

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

In addition to goodwill, acquired intangible assets comprise:


	Patents,
	licences			Total
	and		Customer	acquired
	trademarks	Technology	relationships	intangibles
	£m	£m	£m	£m
Cost
At 31 July 2024	23	145	477	645
Foreign exchange rate movements	(1)	(4)	(12)	(17)
Business combinations	12	–	47	59
Reclassified to assets held for sale	(3)	(39)	(56)	(98)
At 31 July 2025	31	102	456	589
Foreign exchange rate movements	(1)	–	(8)	(9)
Business combinations	14	–	95	109
Disposals	–	(2)	(5)	(7)
Reclassified to assets held for sale subsequently disposed	(1)	(99)	(132)	(232)
At 31 July 2026	43	1	406	450
Amortisation
At 31 July 2024	11	102	340	453
Foreign exchange rate movements	–	(3)	(7)	(10)
Charge for the year	4	11	37	52
Reclassified to assets held for sale	(3)	(33)	(46)	(82)
At July 2025	12	77	324	413
Foreign exchange rate movements	–	–	(4)	(4)
Charge for the year	4	3	32	39
Disposals	–	(2)	(5)	(7)
Reclassified to assets held for sale subsequently disposed	(1)	(77)	(108)	(186)
At July 2026	15	1	239	255
Net book value at 31 July 2026	28	–	167	195
Net book value at 31 July 2025	19	25	132	176
Net book value at 31 July 2024	12	43	137	192

Individually material intangible assets comprise:

–

£24m of customer-related intangibles attributable to Heating & Cooling Products (remaining

amortisation period: 8 years); and

–

£91m of customer-related intangibles attributable to DRC Heat Transfer (DRC) (remaining

amortisation period: 15 years).

11. Impairment testing

Goodwill

Goodwill is tested for impairment at least annually or whenever there is an indication that the

carrying value may not be recoverable. Further details of the impairment review process and

judgements are included in the ‘Sources of estimation uncertainty’ section of the ‘Basis of

preparation’ for the consolidated financial statements.

For the purpose of impairment testing, assets are grouped at the lowest levels for which there

are separately identifiable cash-flows, known as cash generating units (CGUs), taking into

consideration the commonality of reporting, policies, leadership and intra-segmental trading

relationships. Goodwill acquired through business combinations is allocated to groups of CGUs at

a segmental (or operating segment) level, being the lowest level at which management monitors

performance separately.

The carrying value of goodwill at 31 July is allocated by business segment as follows:


		2026		2025
	2026	Number of	2025	Number of
	£m	CGUs	£m	CGUs
John Crane	129	1	130	1
Flex-Tek	288	1	263	1
Smiths Detection	–	–	623	1
Smiths Interconnect	–	–	–	1
	417	2	1,016	4

Critical estimates used in impairment testing

The recoverable amount for impairment testing is determined from the higher of fair value less

costs of disposal and value in use of the CGU. In assessing value in use, the estimated future cash-

flows are discounted to their present value using a post-tax discount rate that reflects current

market assessments of the time value of money, from which pre-tax discount rates are determined.

Fair value less costs of disposal is calculated using available information on past and expected

future profitability, valuation multiples for comparable quoted companies and similar transactions

(adjusted as required for significant differences) and information on costs of similar transactions.

Fair value less costs to sell models are used when trading projections in the strategic plan cannot

be adjusted to eliminate the impact of a major restructuring.

The value in use of CGUs is calculated as the net present value of the projected risk-adjusted

cash-flows of each CGU. These cash-flow forecasts are based on the FY2026 business plan and the

five-year detailed segmental strategic plan projections which have been prepared by segmental

management and approved by the Board.

The principal assumptions used in determining the value in use were:

–

Revenue: Projected sales were built up with reference to markets and product categories.

They incorporated past performance, historical growth rates and projections of developments

in key markets;

Overview

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Financial statements

Smiths Group plc Annual Report FY2026

139

NOTES TO THE ACCOUNTS

CONTINUED

–

Average earnings before interest and tax margin: Projected margins reflect historical

performance, our expectations for future cost inflation and the impact of all completed projects

to improve operational efficiency and leverage scale. The projections did not include the impact

of future restructuring projects to which the Group was not yet committed;

–

Projected capital expenditure: The cash-flow forecasts for capital expenditure were based

on past experience and included committed ongoing capital expenditure consistent with the

FY2027 budget and the segmental strategic projections. The forecasts exclude future capital

expenditure that improves the operation in excess of its current standard of performance;

–

Discount rate: The discount rates have been determined with reference to illustrative weighted

average cost of capital (WACC) for each CGU. In determining these discount rates, management

have considered systematic risks specific to each of the Group’s CGUs and have validated rates

against the Group’s WACC, the WACCs of the CGU’s peer group and an average of discount

rates used by other companies for the industries in which Smiths divisions operate. Pre-tax

rates of 14.0% to 15.4% (FY2025: 12.2% to 13.6%) have been used for the impairment testing;

and

–

Long-term growth rates: For the purposes of the Group’s value in use calculations, a long-term

growth rate into perpetuity was applied immediately at the end of the five-year detailed forecast

period. CGU specific long-term growth rates have been calculated by revenue weighting the

long-term GDP growth rates of the markets that each CGU operates in. The long-term growth

rates used in the testing ranged from 2.0% to 2.5% (FY2025: 2.1% to 2.6%). These rates do not

reflect the long-term assumptions used by the Group for investment planning.

Of the principal assumptions above, the key assumptions that the impairment models are most

sensitive to are: the revenue growth assumption; the average earnings before interest and tax

margin assumption; and the discount rate assumption.

The assumptions used in the impairment testing of CGUs with significant goodwill balances were

as follows:


	As at 31 May 2026
	John Crane	Flex-Tek
Net book value of goodwill (£m)	129	288
Basis of valuation	Value in use	Value in use
Discount rate – pre-tax	14.0%	15.4%
– post-tax	11.0%	12.0%
Period covered by management projections	5 years	5 years
Capital expenditure – annual average over projection period (£m)	28	10
Revenue – compound annual growth rate (CAGR) over projection period	6.0%	3.1%
Average earnings before interest and tax margin	24.9%	21.6%
Long-term growth rates	2.5%	2.0%


	As at 31 May 2025
			Smiths	Smiths
	John Crane	Flex-Tek	Detection	Interconnect
Net book value of goodwill (£m)	128	255	610	252
Basis of valuation	Value in use	Value in use	Value in use	Value in use
Discount rate – pre-tax	11.8%	13.6%	12.8%	12.7%
– post-tax	9.4%	10.7%	9.7%	10.3%
Period covered by management projections	5 years	5 years	5 years	5 years
Capital expenditure – annual average over projection
period (£m)	29	11	14	11
Revenue – CAGR over projection period	6.4%	3.5%	4.6%	6.2%
Average earnings before interest and tax margin	25.7%	21.4%	13.3%	21.1%
Long-term growth rates	2.6%	2.1%	2.1%	2.3%

Forecast earnings before interest and tax have been projected using:

–

Expected future sales based on the strategic plan, which was constructed at a market level

with input from key account managers, product line managers, business development and

sales teams. An assessment of the market and existing contracts/programmes was made to

produce the sales forecast; and

–

Current cost structure and production capacity, which include our expectations for future cost

inflation. The projections did not include the impact of future restructuring projects to which

the Group was not yet committed.

The forecast model on which the value in use is based on is underpinned by various granular

assumptions on operating cash flows, which collectively roll up to the projected EBIT over the

forecast period. We consider that each of these granular assumptions do not give rise to significant

estimation uncertainty that would result in a material change to the outcome of the impairment test

of any of CGUs.

All of the Group’s CGUs have significant impairment headroom for both FY2026 and FY2025.

There

are no CGUs sensitive to impairment, the recoverable amount of all CGUs exceeded their carrying

value, on the basis of the assumptions set out in the table above and any reasonably possible

changes thereof.

Property, plant and equipment, right of use assets and finite-life intangible assets

At each reporting period date, the Group reviews the carrying amounts of its property, plant,

equipment, right of use assets and finite-life intangible assets to determine whether there is any

indication that those assets have suffered an impairment loss.

The Group has no indefinite life intangible assets other than goodwill. During the year, impairment

tests were carried out for capitalised development costs that have not yet started to be amortised

and acquired intangibles where there were indications of impairment. Value in use calculations

were used to determine the recoverable values of these assets.

140

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

12. Property, plant and equipment


			Fixtures,
			fittings,
	Land and	Plant and	tools and
	buildings	machinery	equipment	Total
	£m	£m	£m	£m
Cost or valuation
At 31 July 2024	181	496	114	791
Foreign exchange rate movements	(3)	(8)	–	(11)
Business combinations	–	5	–	5
Additions	6	60	6	72
Disposals	(5)	(22)	(7)	(34)
Reclassified to assets held for sale	(8)	(101)	(26)	(135)
At 31 July 2025	171	430	87	688
Foreign exchange rate movements	(2)	(1)	(1)	(4)
Business combinations	1	5	–	6
Additions	12	36	7	55
Disposals	(7)	(30)	(2)	(39)
Reclassified to assets held for sale
subsequently disposed	(44)	(81)	(34)	(159)
Reclassified to assets held for sale	–	(10)	–	(10)
At 31 July 2026	131	349	57	537
Depreciation
At 31 July 2024	113	314	94	521
Foreign exchange rate movements	(2)	(5)	–	(7)
Charge for the year	9	31	5	45
Disposals	(4)	(21)	(7)	(32)
Impairment charge for the year	3	6	1	10
Reclassified to assets held for sale	(8)	(63)	(22)	(93)
At July 2025	111	262	71	444
Foreign exchange rate movements	(1)	(1)	(1)	(3)
Charge for the year	5	18	3	26
Disposals	(6)	(23)	(3)	(32)
Impairment charge for the year	–	3	–	3
Reclassified to assets held for sale
subsequently disposed	(25)	(51)	(26)	(102)
Reclassified to assets held for sale	–	(7)	–	(7)
At 31 July 2026	84	201	44	329
Net book value at 31 July 2026	47	148	13	208
Net book value at 31 July 2025	60	168	16	244
Net book value at 31 July 2024	68	182	20	270

13. Right of use assets


	Properties	Vehicles	Equipment	Total
	£m	£m	£m	£m
Cost or valuation
At 31 July 2024	212	36	2	250
Foreign exchange rate movements	(5)	–	–	(5)
Business combinations	6	–	–	6
Recognition of right of use asset	23	5	–	28
Derecognition of right of use asset	(42)	(18)	(1)	(61)
Reclassified to assets held for sale	(23)	–	–	(23)
At 31 July 2025	171	23	1	195
Foreign exchange rate movements	(1)	–	–	(1)
Business combinations	5	–	–	5
Recognition of right of use asset	48	4	–	52
Derecognition of right of use asset	(11)	(5)	–	(16)
Reclassified to assets held for sale subsequently disposed	(44)	(6)	–	(50)
Reclassified to assets held for sale	(6)	–	–	(6)
At 31 July 2026	162	16	1	179
Depreciation
At 31 July 2024	116	23	1	140
Foreign exchange rate movements	(2)	–	–	(2)
Charge for the year	28	6	–	34
Derecognition of right of use asset	(42)	(18)	(1)	(61)
Impairment charge for the year	2	–	–	2
Reclassified to assets held for sale	(17)	–	–	(17)
At 31 July 2025	85	11	–	96
Foreign exchange rate movements	(1)	–	–	(1)
Charge for the year	22	5	–	27
Derecognition of right of use asset	(11)	(5)	–	(16)
Impairment charge for the year	1	–	–	1
Reclassified to assets held for sale subsequently disposed	(17)	(2)	–	(19)
Reclassified to assets held for sale	(4)	–	–	(4)
At 31 July 2026	75	9	–	84
Net book value at 31 July 2026	87	7	1	95
Net book value at 31 July 2025	86	12	1	99
Net book value at 31 July 2024	96	13	1	110

Overview

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Governance

Financial statements

Smiths Group plc Annual Report FY2026

141

NOTES TO THE ACCOUNTS

CONTINUED

14. Financial assets – other investments

	Investment in	Investments	Cash
	ICU Medical,	in early stage	collateral
	Inc equity	businesses	deposit	Total
	£m	£m	£m	£m
Cost or valuation
At 31 July 2024	47	5	1	53
Fair value change through other comprehensive income	8	–	–	8
Disposals	(55)	–	–	(55)
At 31 July 2025	–	5	1	6
Additions	–	–	1	1
Reclassified as held for sale, subsequently disposed	–	(1)	–	(1)
At 31 July 2026	–	4	2	6

The Group’s investments in early-stage businesses are in businesses that are developing or

commercialising related technology.

Cash collateral deposits represent amounts held on deposit with banks as security for liabilities or

letters of credit or margin calls related to commodity hedging.

15. Inventories

	31 July 2026	31 July 2025
	£m	£m
Raw materials and consumables	75	133
Work in progress	45	140
Finished goods	164	313
Total inventories	284	586

In FY2026, operating costs included £716m (FY2025: £1,470m) of inventory consumed, £6m

(FY2025: £16m) was charged for the write-down of inventory and £4m (FY2025: £7m) was released

from provisions no longer required.

Inventory provisioning

	31 July 2026	31 July 2025
	£m	£m
Gross inventory carried at full value	278	505
Gross value of inventory partly or fully provided for	28	138
	306	643
Inventory provision	(22)	(57)
Inventory after provisions	284	586

16. Trade and other receivables

	31 July 2026	31 July 2025
	£m	£m
Non-current
Trade receivables	–	3
Contract assets	77	82
Other receivables	1	5
	78	90
Current
Trade receivables	382	504
Prepayments	28	36
Contract assets	22	114
Other receivables	32	83
	464	737

Trade receivables do not carry interest. Management considers that the carrying value of trade and

other receivables approximates to the fair value. Trade and other receivables, including accrued

income and other receivables qualifying as financial instruments, are accounted for at amortised

cost. The maximum credit exposure arising from these financial assets was £493m

(FY2025: £727m).

Contract assets relate to Buyback Stock balances for John Crane’s Performance Plus modular

service framework contracts, where John Crane take responsibility for the maintenance of all the

seals at the customer site. The main movements in the year arose from the disposal of Smiths

Detection and an increase in contract asset balances of £5m (FY2025: £5m) principally within

John Crane.

A number of Flex-Tek’s customers provide supplier finance schemes which allow their suppliers to

sell trade receivables, without recourse, to banks. This is commonly known as invoice discounting

or factoring. During FY2026 the Group collected £124m of receivables through these schemes

(FY2025: £70m). The impact of invoice discounting on the FY2026 balance sheet was that trade

receivables were reduced by £33m (FY2025: £18m). Costs of discounting were £1m (FY2025: £1m),

charged to the income statement within financing costs. The cash received via these schemes was

classified as an operating cash inflow as it had arisen from operating activities.

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 conditions of

the industry in which the debtor operates and a default risk multiplier applied to reflect country risk

premium. Credit risk is managed separately for each customer and, where appropriate, a credit

limit is set for the customer based on previous experience of the customer and third-party credit

ratings. The Group has no significant concentration of credit risk, with exposure spread over a

large number of customers. No single customer represented more than 10% of Group or

divisional revenue.

142

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Ageing of trade receivables

	31 July 2026	31 July 2025
	£m	£m
Trade receivables which are not yet due	288	388
Trade receivables which are between 1-30 days overdue	41	49
Trade receivables which are between 31-60 days overdue	19	22
Trade receivables which are between 61-90 days overdue	10	13
Trade receivables which are between 91-120 days overdue	5	6
Trade receivables which are more than 120 days overdue	26	44
	389	522
Expected credit loss allowance provision	(7)	(15)
Trade receivables	382	507

Movement in expected credit loss allowance

	31 July 2026	31 July 2025
	£m	£m
Brought forward loss allowance at the start of the period	15	29
Increase in allowance recognised in the income statement	7	8
Amounts written off or recovered during the year	(14)	(19)
Amounts reclassed to discontinued operations	(1)	(3)
Carried forward loss allowance at the end of the year	7	15

17. Trade and other payables

	31 July 2026	31 July 2025
	£m	£m
Non-current
Other payables	10	12
Contract liabilities	–	26
	10	38
Current
Trade payables	159	229
Other payables	370	46
Other taxation and social security costs	16	27
Accruals	116	222
Contract liabilities	14	155
	675	679

Trade and other payables, including accrued expenses and other payables qualifying as financial

instruments, are accounted for at amortised cost and are categorised as ‘Trade and other financial

payables’ in note 21.

Other payables at 31 July 2026 includes a £278m (FY2025: £nil) financial liability in respect of a

non-cancellable share buy back commitment and a £41m (FY2025: £nil) financial liability for

shares purchased before the year end but have not yet been settled or cancelled, see note 24 for

further details.

Contract liabilities comprise deferred income balances of £15m (FY2025: £181m) in respect of

payments being made in advance of revenue recognition. The movement in the year arises primarily

from the reclassification of the Smiths Detection business as held for sale, which was subsequently

disposed of during the financial year.

Overview

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Governance

Financial statements

Smiths Group plc Annual Report FY2026

143

NOTES TO THE ACCOUNTS

CONTINUED

18. Borrowings and net cash/(debt)

This note sets out the calculation of net cash/(debt), an important measure in explaining our

financing position. Net cash/(debt) includes accrued interest and fair value adjustments relating to

hedge accounting.

	31 July 2026	31 July 2025
	£m	£m
Cash and cash equivalents
Net cash and deposits	2,956	195
Short-term borrowings
€650m 2.00% Eurobond 2027	(554)	–
Lease liabilities	(24)	(29)
Interest accrual	(9)	(3)
	(587)	(32)
Long-term borrowings
€650m 2.00% Eurobond 2027	–	(556)
€650m 3.625% Eurobond 2033	(537)	–
Lease liabilities	(80)	(79)
	(617)	(635)
Borrowings/gross debt	(1,204)	(667)
Derivatives managing interest rate risk and currency profile of the debt	(5)	10
Net cash/(debt) (excludes £2m of net debt in discontinued operations,
FY2025: excludes £21m of net cash)	1,747	(462)

Net cash for the total Group (including £2m of net debt held in discontinued operations) is £1,745m

(FY2025: £441m net debt).

Analysis of financial derivatives on balance sheet

	Non-current	Current	Current	Non-current
	assets	assets	liabilities	liabilities	Net balance
	£m	£m	£m	£m	£m
Derivatives managing interest rate risk and
currency profile of the debt	–	17	–	(22)	(5)
Foreign exchange forward contracts	–	3	(2)	–	1
Commodity derivatives	–	1	–	–	1
At 31 July 2026	–	21	(2)	(22)	(3)
Derivatives managing interest rate risk and
currency profile of the debt	10	–	–	–	10
Foreign exchange forward contracts	–	7	(2)	–	5
At 31 July 2025	10	7	(2)	–	15

Cash and cash equivalents

	31 July 2026	31 July 2025
	£m	£m
Cash at bank and in hand	100	102
Short-term deposits	2,856	93
Cash and cash equivalents	2,956	195

Cash and cash equivalents include highly liquid investments with maturities of three months or less.

Borrowings are accounted for at amortised cost and are categorised as other financial liabilities.

See note 19 for a maturity analysis of borrowings. Interest of £27m (FY2025: £12m) was charged to

the consolidated income statement in the period in respect of public bonds.

Movements in assets/(liabilities) arising from financing activities

	Changes in net debt
				Interest rate		Changes in	Total
	Cash	Other		and cross-		other financing	liabilities
	and cash	short-term	Long-term	currency		items: FX	from financing
	equivalents	borrowings	borrowings	swaps	Net debt	contracts	activities
	£m	£m	£m	£m	£m	£m	£m
At 31 July 2025	195	(32)	(635)	10	(462)	5	(457)
Foreign exchange
gains/(losses)	(11)	(2)	2	–	(11)	–	(11)
Net cash inflow
from total Group	2,741	–	–	–	2,741	–	2,741
Movement in net
debt items held in
disposal group	31	(4)	(8)	–	19	–	19
Lease payments	–	41		–	41	–	41
Disposal of lease
liabilities	–	20	20	–	40	–	40
Interest paid	–	65	–	–	65	–	65
Interest expense	–	(80)	–	–	(80)	–	(80)
Cash inflow from
matured derivative
contracts	–	–	–	–	–	(4)	(4)
Changes due to
Proceeds from debt	–	–	(565)	–	(565)	–	(565)
Fair value
movements	–	2	28	(15)	15	(6)	9
Lease liabilities
acquired	–	(4)	–	–	(4)	–	(4)
Net movement
from new leases
and modifications	–	(52)	–	–	(52)	–	(52)
Reclassifications	–	(541)	541	–	–	–	–
At 31 July 2026	2,956	(587)	(617)	(5)	1,747	(5)	1,742

144

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED


	Changes in net debt
				Interest rate		Changes in	Total
	Cash	Other		and cross-		other financing	liabilities
	and cash	short-term	Long-term	currency		items: FX	from financing
	equivalents	borrowings	borrowings	swaps	Net debt	contracts	activities
	£m	£m	£m	£m	£m	£m	£m
At 31 July 2024	459	(34)	(625)	(13)	(213)	–	(213)
Foreign exchange
gains/(losses)	(12)	1	(11)	–	(22)	–	(22)
Net cash inflow
from total Group	(221)	–	–	–	(221)	–	(221)
Reclassified to
asset/liability held
for sale	(31)	2	8	–	(21)	–	(21)
Lease payments	–	41	–	–	41	–	41
Interest paid	–	63	–	–	63	–	63
Interest expense	–	(71)	–	–	(71)	–	(71)
Cash inflow from
matured derivative
contracts	–	–	–	–		2	2
Fair value
movements	–	–	(7)	23	16	3	19
Lease liabilities
acquired	–	(1)	(5)	–	(6)	–	(6)
Net movement
from new leases
and modifications	–	(28)	–	–	(28)	–	(28)
Reclassifications	–	(5)	5	–	–	–	–
At 31 July 2025	195	(32)	(635)	10	(462)	5	(457)

Cash pooling

Cash and overdraft balances in interest compensation cash pooling systems are reported gross on

the balance sheet. The cash pooling agreements incorporate a legally enforceable right of

net settlement. However, as there is no intention to settle the balances net, these arrangements do

not qualify for net presentation. At 31 July 2026 the total value of overdrafts on accounts in interest

compensation cash pooling systems was £nil (FY2025: £nil). The balances held in zero balancing

cash pooling arrangements have daily settlement of balances. Therefore, netting is not relevant.

Change of control

The Company has in place credit facility agreements under which a change of control would trigger

prepayment clauses. The Company has two bonds in issue, the terms of which would allow

bondholders to exercise put options and require the Company to buy back the bonds at their

principal amount plus interest if a rating downgrade occurs at the same time as a change of control

takes effect.

Lease liabilities

Lease liabilities have been measured at the present value of the remaining lease payments.

The weighted average incremental borrowing rate applied to lease liabilities in FY2026 was 4.73%

(FY2025: 4.69%).

19. Financial risk management

The Group’s international operations and debt financing expose it to financial risks which include the

effects of changes in foreign exchange rates, debt market prices, interest rates, credit risks and

liquidity risks. The management of operational credit risk is discussed in note 16.

Treasury Risk Management Policy

The Board maintains a Treasury Risk Management Policy, which governs the treasury operations of

the Group and its subsidiary companies and the consolidated financial risk profile to be maintained.

A report on treasury activities, financial metrics and compliance with the Policy is circulated to the

Chief Financial Officer each month and key elements to the Audit & Risk Committee on a semi-

annual basis.

The Policy maintains a treasury control framework within which counterparty risk, financing

and debt strategy, cash and liquidity, interest rate risk and currency translation management

are reserved for Group Treasury, while currency transaction management is devolved to operating

divisions.

Centrally directed cash management systems exist globally to manage overall liquid resources

efficiently across the divisions. The Group uses financial instruments to raise financing for its global

operations, to manage related interest rate and currency financial risk, and to hedge transaction

risk within subsidiary companies.

The Group does not speculate in financial instruments. All financial instruments hedge existing

business exposures and all are recognised on the balance sheet.

The Policy defines four treasury risk components and for each component a set of financial metrics

to be measured and reported monthly against pre-agreed objectives.

1) Credit quality

The Group’s strategy is to maintain a solid investment-grade rating to ensure access to the widest

possible sources of financing at the right time and to optimise the resulting cost of debt capital. The

credit ratings at the end of July 2026 were BBB/ Baa2 (both stable outlook) from Standard & Poor’s

and Moody’s respectively. An essential element of an investment-grade rating is consistent and

robust cash-flow metrics. The Group’s objective is to maintain a net debt/headline EBITDA ratio

of two times or lower over the medium term. Capital management is discussed in more detail in

note 26.

2) Debt and interest rate

The Group’s risk management objectives are to ensure that the majority of funding is drawn from

the public debt markets, the average maturity profile of gross debt is to be at or greater than three

years, and between 40-60% of gross debt (excluding leases) is at fixed rates. At 31 July 2026 these

measures were 100% (FY2025: 100%), 3.9 years (FY2025: 1.6 years) and 47% (FY2025: 54%).

The Group has no financial covenants in its external debt agreements. Interest rate risk

management is discussed in note 19(b).

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

145

NOTES TO THE ACCOUNTS

CONTINUED

3) Liquidity management

The Group’s objective is to ensure that at any time undrawn committed facilities, net of short-term

overdraft financing, are at least £300m and that committed facilities have at least 12 months to run

until maturity. At 31 July 2026, these measures were £594m (FY2025: £805m) and a weighted

average maturity of 45 months (FY2025: 49 months). At 31 July 2026, net cash resources were

£2,956m (FY2025: £195m). Liquidity risk management is discussed in note 19(d).

4) Currency management

The Group is an international business with the majority of its net assets denominated in

foreign currency. It protects the balance sheet and reserves from adverse foreign exchange

movements by financing foreign currency assets where appropriate in the same currency.

The Group’s objective for managing transaction currency exposure is to reduce medium-term

volatility to cash-flow, margins and earnings. Foreign exchange risk management is discussed

in note 19(a) below.

(a) Foreign exchange risk

Transactional currency exposure

The Group is exposed to foreign currency risks arising from sales or purchases by businesses in

currencies other than their functional currency. It is Group policy that, when the net foreign

exchange exposure to known future sales and purchases is material, this exposure is hedged using

forward foreign exchange contracts. The net exposure is calculated by adjusting the expected

cash-flow for payments or receipts in the same currency linked to the sale or purchase. This policy

minimises the risk that the profits generated from the transaction will be affected by foreign

exchange movements which occur after the price has been determined. Hedge accounting

documentation and effectiveness testing are only undertaken if it is cost-effective.

The following table shows the currency of financial instruments. It excludes loans and derivatives

designated as net investment hedges.


	At 31 July 2026
	Sterling	US$	Euro	Other	Total
	£m	£m	£m	£m	£m
Financial assets and liabilities
Financial instruments included in trade and
other receivables	25	282	69	121	497
Financial instruments included in trade and
other payables	(356)	(153)	(30)	(70)	(609)
Cash and cash equivalents	2,508	24	347	77	2,956
Borrowings not designated in hedge
accounting relationships	(17)	(57)	(306)	(23)	(403)
	2,160	96	80	105	2,441
Exclude balances held in operations with the
same functional currency	(2,167)	(142)	(35)	(91)	(2,435)
Exposure arising from intra-Group loans	–	57	(6)	(12)	39
Future forward foreign exchange contract
cash-flows	25	(57)	(15)	47	–
	18	(46)	24	49	45


	At 31 July 2025
	Sterling	US$	Euro	Other	Total
	£m	£m	£m	£m	£m
Financial assets and liabilities
Financial instruments included in trade and
other receivables	30	395	176	143	744
Financial instruments included in trade and
other payables	(58)	(221)	(96)	(107)	(482)
Cash and cash equivalents	18	99	26	52	195
Borrowings not designated in hedge
accounting relationships	(24)	(51)	(11)	(22)	(108)
	(34)	222	95	66	349
Exclude balances held in operations with the
same functional currency	33	(386)	(74)	28	(399)
Exposure arising from intra-Group loans	–	154	(15)	(46)	93
Future forward foreign exchange contract
cash-flows	(85)	(52)	32	105	–
	(86)	(62)	38	153	43

Financial instruments included in trade and other receivables comprise trade receivables, accrued

income and other receivables which qualify as financial instruments. Similarly, financial

instruments included in trade and other payables comprise trade payables, accrued expenses and

other payables that qualify as financial instruments.

Based on the assets and liabilities held at the year-end, if the specified currencies were to

strengthen 10% while all other market rates remained constant, the change in the fair value of

financial instruments not designated as net investment hedges would have the following effect:


	Impact on	Gain/(loss)	Impact on	Gain/(loss)
	profit	recognised in	profit	recognised in
	for the year	reserves	for the year	reserves
	FY2026	FY2026	FY2025	FY2025
	£m	£m	£m	£m
US dollar	2	3	4	2
Euro	(3)	1	(1)	(2)
Sterling	2	(1)	3	(2)

These sensitivities were calculated before adjusting for tax and exclude the effect of quasi-equity

intra-Group loans.

146

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Cash-flow hedging

The Group uses forward foreign exchange contracts to hedge future foreign currency sales and

purchases. At 31 July 2026, contracts with a nominal value of £58m (FY2025: £103m) were

designated as hedging instruments. In addition, the Group had outstanding foreign currency

contracts with a nominal value of £296m (FY2025: £357m) which were being used to manage

transactional foreign exchange exposures, but were not accounted for as cash-flow hedges. The fair

value of the contracts is disclosed in note 20.

The majority of hedged transactions will be recognised in the consolidated income statement in

the same period that the cash-flows are expected to occur, with the only differences arising because

of normal commercial credit terms on sales and purchases. It is the Group’s policy to hedge 80%

of certain exposures for the next two years and 50% of highly probable exposures for the next

12 months.

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic

prospective effectiveness assessments to ensure that an economic relationship exists between the

hedged item and hedging instrument. The foreign exchange forward contracts have similar critical

terms to the hedged items, such as the notional amounts and maturities. Therefore, there is an

economic relationship and the hedge ratio is established as 1:1.

The main sources of hedge ineffectiveness in these hedging relationships are the effect of the

Group’s and the counterparty credit risks on the fair value of the foreign exchange forward

contracts, which is not reflected in the fair value of the hedged item and the risk of over-hedging

where the hedge relationship requires re-balancing. No other sources of ineffectiveness emerged

from these hedging relationships. Any hedge ineffectiveness is recognised immediately in the

income statement in the period that it occurs. Of the foreign exchange contracts designated as

hedging instruments, 100% are for periods of 12 months or less (FY2025: 100%).

The Group also has exposures to the fair values of non-derivative financial instruments such as EUR

fixed rate borrowings. To manage the risk of changes in these fair values, the Group has entered into

fixed-to-fixed cross-currency interest rate swaps, which for accounting purposes are designated as

cash flow hedges.

At 31 July 2026, the Group had designated the following hedge against the

variability in future interest cash flows arising from fluctuations in market rates:

–

€260m of the fixed/fixed and € exchange exposure of EUR/GBP interest rate swaps maturing

on 13 November 2033 partially hedging the € 2033 Eurobond.

The fair values of the hedging instruments are disclosed in note 20. The effect of the swaps was to

convert £229m (FY2025: £nil) debt from fixed Euro rate to fixed Sterling rate. The swaps have similar

critical terms to the hedged items, such as the reference rate, reset dates, notional amounts,

payment dates and maturities. Therefore, there is an economic relationship and the hedge ratio is

established as 1:1. Hedge effectiveness is determined at the inception of the hedge relationship, and

through periodic prospective effectiveness assessments to ensure that an economic relationship

exists between the hedged item and hedging instrument. The main source of hedge ineffectiveness

in these hedging relationships is the effect of the currency basis risk and changes in yield curves

on cross-currency interest rate swaps which are not reflected in the fair value of the hedged item.

No other sources of ineffectiveness emerged from these hedging relationships. Any hedge

ineffectiveness was recognised immediately in the income statement in the period in which

it occurred.

The following table presents a reconciliation by risk category of the cash-flow hedge reserve and

analysis of other comprehensive income in relation to hedge accounting:

		Year ended	Year ended
		31 July 2026	31 July 2025
		£m	£m
Brought forward cash-flow hedge reserve at start of year		1	–
Cross-currency swaps:	Net fair value losses on effective hedges	(3)	–
	Amount reclassified to income statement
	– finance costs	3	–
Foreign exchange forward contracts:	Net fair value gains on effective hedges	–	(2)
	Amount reclassified to income statement
	– finance costs	–	3
Carried forward cash-flow hedge reserve at end of year		1	1

The following tables set out information regarding the change in value of the hedged item used in

calculating hedge ineffectiveness as well as the impacts on the cash-flow hedge reserve:

					Changes in value
				Changes in value	of the hedging
				of the hedged item	instrument
				for calculating	for calculating	Cash-flow hedge
			Financial	ineffectiveness	ineffectiveness	reserve
Hedged item	Hedged exposure	Hedging instrument	year	£m	£m	£m
	Foreign currency		FY2026	1	–	1
	& interest rate	Cross-currency
Bonds	risk	swaps	FY2025	–	–	–
			FY2026	–	–	–
Sales and	Foreign currency	Foreign exchange
purchases	risk	contracts	FY2025	(2)	2	(2)

Cash-flow hedges generated £1m of ineffectiveness in FY2026 (FY2025: £nil) which was recognised

in the income statement through finance costs.

Translational currency exposure

The Group has significant investments in overseas operations, particularly in the US and Europe. As

a result, the sterling value of the Group’s balance sheet can be significantly affected by movements

in exchange rates. The Group seeks to mitigate the effect of these translational currency exposures

by matching the net investment in overseas operations with borrowings denominated in their

functional currencies, except where significant adverse interest differentials or other factors would

render the cost of such hedging activity uneconomic. This is achieved by borrowing primarily in the

relevant currency or in some cases indirectly using cross-currency swaps.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

147

NOTES TO THE ACCOUNTS

CONTINUED

Net investment hedges

The table below sets out the currency of loans and swap contracts designated as net

investment hedges:


	At 31 July 2026			At 31 July 2025
	US$	Euro	Total	US$	Euro	Total
	£m	£m	£m	£m	£m	£m
Loans designated as net
investment hedges	–	–	–	–	(296)	(296)
Cross-currency swap	(236)	–	(236)	(240)	–	(240)
	(236)	–	(236)	(240)	(296)	(536)

At 31 July 2026, cross-currency swaps hedged the Group’s exposure to US dollars and euros

(FY2025: US dollars and euros). All the cross-currency swaps designated as net investment hedges

were current (FY2025: non-current). Swaps generating £236m of the US dollar exposure (FY2025:

£240m) will mature in February 2027.

In addition, non-swapped borrowings, maturing in February 2027, previously used to hedge the

Group’s exposure to euros were de-designated following the disposal of the Detection business

(FY2025: euros).

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic

prospective effectiveness assessments to ensure that an economic relationship exists between the

hedged item and hedging instrument. The swaps and borrowings have the same notional amount as

the hedged items and, therefore, there is an economic relationship with the hedge ratio established

as 1:1.

The main sources of hedge ineffectiveness in these hedging relationships are the effect of the

counterparty and the Group’s own credit risk on the fair value of the foreign exchange forward

contracts which is not reflected in the fair value of the hedged item and the risk of over-hedging

where the hedge relationship requires re-balancing. No other sources of ineffectiveness emerged

from these hedging relationships. Any hedge ineffectiveness is recognised immediately in the

income statement in the period that it occurs.

The following table presents a reconciliation by risk category of the net investment hedge reserve

and analysis of other comprehensive income in relation to hedge accounting:


		Year ended	Year ended
		31 July 2026	31 July 2025
		£m	£m
Brought forward net investment hedge reserve at start of year		(191)	(191)
Cross-currency swaps	Net fair value gains on effective hedges	4	7
Bonds	Net fair value gains on effective hedges	(2)	(7)
Amounts removed from hedge reserve
and recognised in income statement	Profit/(loss) on business disposal	106	–
Carried forward net investment hedge reserve at end of year		(83)	(191)

The following table sets out information regarding the change in value of the hedged item used in

calculating hedge ineffectiveness as well as the impacts on the net investment hedge reserve as at

31 July 2026 and 31 July 2025:

					Changes in value
				Changes in value	of the hedging
				of the hedged item	instrument
				for calculating	for calculating	Net investment
				ineffectiveness	ineffectiveness	hedge reserve
Hedged item	Hedged exposure	Hedging instrument	Financial year	£m	£m	£m
Overseas	Foreign	Bonds	FY2026	(4)	6	4
operation	currency risk
		Cross-currency	FY2026	2	(2)	(2)
		swaps
				(2)	4	2
Overseas	Foreign	Bonds	FY2025	7	(7)	(7)
operation	currency risk
		Cross-currency	FY2025	(7)	8	7
		swaps
				–	1	–

Net investment hedges generated a £2m credit of ineffectiveness in FY2026 (FY2025: £1m) which

was recognised in the income statement through finance costs.

The fair values of these net investment hedges are subject to exchange rate movements. Based on

the hedging instruments in place at the year-end, if the specified currencies were to strengthen 10%

while all other market rates remained constant, it would have the following effect:


	Loss	Loss
	recognised	recognised
	in hedge	in hedge
	reserve	reserve
	31 July 2026	31 July 2025
	£m	£m
US dollar	26	27
Euro	–	33

These movements would be fully offset by an opposite movement on the retranslation of the net

assets of the overseas subsidiaries. These sensitivities were calculated before adjusting for tax.

(b) Interest rate risk

The Group operates an interest rate policy designed to optimise interest cost and reduce volatility in

reported earnings. The Group’s current policy is to require interest rates to be fixed within a band of

between 40% and 60% of the level of gross debt (excluding leases). This is achieved through fixed

rate borrowings and interest rate swaps. At 31 July 2026 47% (FY2025: 54%) of the Group’s gross

borrowings (excluding leases) were at fixed interest rates, after adjusting for interest rate swaps

and the impact of short maturity derivatives designated as net investment hedges.

148

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

The Group monitors its fixed rate risk profile against both gross and net debt. For medium-term

planning, it focuses on gross debt to eliminate the fluctuations of variable cash levels over the cycle.

The weighted average interest rate on borrowings and cross-currency swaps at 31 July 2026, after

interest rate swaps, was 4.48% (FY2025: 4.25%).

Interest rate profile of financial assets and liabilities and the fair value of borrowings

The following table shows the interest rate risk exposure of investments, cash and borrowings, with

the borrowings adjusted for the impact of interest rate hedging. Other financial assets and liabilities

do not earn or bear interest, and for all financial instruments except borrowings, the carrying value

is not materially different from their fair value.

	As at 31 July 2026
	At fair value	Cash and
	through	cash		Fair value of
	profit or loss	equivalents	Borrowings	borrowings
	£m	£m	£m	£m
Fixed interest
Less than one year	–	–	(332)	(332)
Between one and five years	–	–	(48)	(48)
Greater than five years	–	–	(248)	(248)
Total fixed interest financial liabilities	–	–	(628)	(628)
Floating rate interest financial assets/(liabilities)	2	2,920	(576)	(588)
Total interest-bearing financial assets/(liabilities)	2	2,920	(1,204)	(1,216)
Non-interest-bearing assets in the same category	–	36	–	–
Total	2	2,956	(1,204)	(1,216)

	As at 31 July 2025
	At fair value	Cash and
	through	cash		Fair value of
	profit or loss	equivalents	Borrowings	borrowings
	£m	£m	£m	£m
Fixed interest
Less than one year	–	–	(32)	(32)
Between one and five years	–	–	(353)	(352)
Greater than five years	–	–	(27)	(27)
Total fixed interest financial liabilities	–	–	(412)	(411)
Floating rate interest financial assets/(liabilities)	1	142	(255)	(257)
Total interest-bearing financial assets/(liabilities)	1	142	(667)	(668)
Non-interest-bearing assets in the same category	–	53	–	–
Total	1	195	(667)	(668)

Interest rate hedging

The Group also has exposures to the fair values of non-derivative financial instruments such as EUR

fixed rate borrowings. To manage the risk of changes in these fair values, the Group has entered into

fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which for accounting

purposes are designated as fair value hedges.

At 31 July 2026, the Group had designated the following hedge against variability on the fair value of

borrowings arising from fluctuations in base rates:

–

€300m of the fixed/floating and € exchange exposure of EUR/USD interest rate swaps

maturing on 23 February 2027 partially hedging the € 2027 Eurobond.

–

€390m of the fixed/floating and € exchange exposure of EUR/GBP interest rate swaps

maturing on 13 November 2033 partially hedging the € 2033 Eurobond.

At 31 July 2025, the Group had designated the following hedge against variability on the fair value of

borrowings arising from fluctuations in base rates:

–

€300m of the fixed/floating and € exchange exposure of EUR/USD interest rate swaps

maturing on 23 February 2027 partially hedging the € 2027 Eurobond.

The fair values of the hedging instruments are disclosed in note 20. The effect of the swaps was to

convert £590m (FY2025: £259m) debt from fixed rate to floating rate. The swaps have similar critical

terms to the hedged items, such as the reference rate, reset dates, notional amounts, payment

dates and maturities. Therefore, there is an economic relationship and the hedge ratio is

established as 1:1. Hedge effectiveness is determined at the inception of the hedge relationship, and

through periodic prospective effectiveness assessments to ensure that an economic relationship

exists between the hedged item and hedging instrument.

The main source of hedge ineffectiveness in these hedging relationships is the effect of the currency

basis risk on cross-currency interest rate swaps which are not reflected in the fair value of the

hedged item. No other sources of ineffectiveness emerged from these hedging relationships.

Any hedge ineffectiveness was recognised immediately in the income statement in the period in

which it occurred.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

149

NOTES TO THE ACCOUNTS

CONTINUED

The following table sets out the details of the hedged exposures covered by the Group’s fair value hedges:


				Changes in value
			Changes in value	of the hedging			Accumulated fair value
			of hedged item	instrument	Carrying amount		adjustments on hedged item
			for calculating	for calculating
			ineffectiveness	ineffectiveness	Assets	Liabilities	Assets	Liabilities
Hedged item	Hedged exposure	Financial year	£m	£m	£m	£m	£m	£m
Fixed rate bonds (a)	Interest rate and currency rate risk	FY2026	10	(11)	–	590	–	(14)
Fixed rate bonds (a)	Interest rate and currency rate risk	FY2025	(7)	8	–	251	–	(5)

(a) Classified as borrowings.

Fair value hedges generated a £1m ineffectiveness in gain FY2026 (FY2025: £1m) which was recognised in the income statement through finance costs.

Sensitivity of interest charges to interest rate movements

The Group has exposure to sterling, US dollar and euro interest rates. Based on the composition of

net debt and investments at 31 July 2026, and taking into consideration all fixed rate borrowings and

interest rate swaps in place, a one percentage point (100 basis points) change in average floating

interest rates for all three currencies would have a £22m impact (FY2025: £2m impact) on the

Group’s profit before tax.

(c) Financial credit risk

The Group is exposed to credit-related losses in the event of non-performance by counterparties to

financial instruments, but does not currently expect any counterparties to fail to meet their

obligations. Credit risk is mitigated by the Board-approved policy of only placing cash deposits with

highly rated relationship bank counterparties within counterparty limits established by reference to

their Standard & Poor’s long-term debt rating. In the normal course of business, the Group

operates cash pooling systems, where a legal right of set-off applies.

The maximum credit risk exposure in the event of other parties failing to perform their obligations

under financial assets, excluding trade and other receivables and derivatives, totals £2,962m at

31 July 2026 (FY2025: £201m).


	31 July 2026	31 July 2025
	£m	£m
Cash in AAA liquidity funds	2,370	76
Cash at banks with at least a AA- credit rating	269	33
Cash at banks with all other A credit ratings	309	79
Cash at other banks	8	7
Investments in bank deposits	2	1
Other investments	4	5
Total	2,962	201

At 31 July 2026, the maximum exposure with a single liquidity fund for deposits and cash was £395m

(FY2025: £54m), whilst the maximum mark to market exposure with a single bank or financial

institution for derivatives was £3m (FY2025: £3m). This liquidity fund and bank have AAA and A+

credit ratings respectively (FY2025: Both AAA & AA- respectively).

(d) Liquidity risk

Borrowing facility

Board policy specifies the maintenance of an unused committed credit facility of at least £300m

at all times to ensure that the Group has sufficient available funds for operations and planned

development. The Group has a Revolving Credit Facility of US$800m maturing 5 May 2030. At the

balance sheet date, the Group had the following undrawn credit facility:


	31 July 2026	31 July 2025
	£m	£m
Expiring between one and two years	–	200
Expiring between three and four years	594	–
Expiring after more than four years	–	605
Total	594	805

Cash deposits

As at 31 July 2026, £2,856m (FY2025: £93m) of cash and cash equivalents was on deposit with

various banks of which £2,500m (FY2025: £76m) was in liquidity funds. £2m (FY2025: £1m) of

investments comprised bank deposits held to secure liabilities and letters of credit and margin call

deposits related to commodity hedging.

150

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Gross contractual cash-flows for borrowings


	As at 31 July 2026
				Contractual	Total
		Fair value	Lease	interest	contractual
	Borrowings	adjustments	liabilities	payments	cash-flows
	£m	£m	£m	£m	£m
Less than one year	(565)	2	(24)	(31)	(618)
Between one and two years	–	–	(16)	(20)	(36)
Between two and three years	–	–	(13)	(20)	(33)
Between three and four years	–	–	(10)	(20)	(30)
Between four and five years	–	–	(8)	(20)	(28)
Greater than five years	(549)	12	(33)	(40)	(610)
Total	(1,114)	14	(104)	(151)	(1,355)


	As at 31 July 2025
				Contractual	Total
		Fair value	Lease	interest	contractual
	Borrowings	adjustments	liabilities	payments	cash-flows
	£m	£m	£m	£m	£m
Less than one year	(3)	–	(29)	(11)	(43)
Between one and two years	(561)	5	(19)	(11)	(586)
Between two and three years	–	–	(14)	–	(14)
Between three and four years	–	–	(11)	–	(11)
Between four and five years	–	–	(8)	–	(8)
Greater than five years	–	–	(27)	–	(27)
Total	(564)	5	(108)	(22)	(689)

The figures presented in the borrowings column include the non-cash adjustments which are

highlighted in the adjacent column. The contractual interest reported for borrowings is before the

effect of interest rate swaps.

Gross contractual cash-flows for derivative financial instruments


	As at 31 July 2026
			Net
	Receipts	Payments	cash-flow
	£m	£m	£m
Assets
Less than one year	466	(445)	21
Greater than one year	8	(8)	–
Liabilities
Less than one year	131	(133)	(2)
Greater than one year	607	(629)	(22)
Total	1,212	(1,215)	(3)


	As at 31 July 2025
			Net
	Receipts	Payments	cash-flow
	£m	£m	£m
Assets
Less than one year	238	(231)	7
Greater than one year	271	(261)	10
Liabilities
Less than one year	208	(210)	(2)
Greater than one year	7	(7)	–
Total	724	(709)	15

The table above presents the undiscounted future contractual cash-flows for all derivative financial

instruments. For this disclosure, cash-flows in foreign currencies are translated using the spot

rates at the balance sheet date. The fair values of these financial instruments are presented in

note 20.

Gross contractual cash-flows for other financial liabilities

The contractual cash-flows for financial liabilities included in trade and other payables were

£599m (FY2025: £461m) due in less than one year, £10m (FY2025: £21m) due between one and

five years.

(e) Commodity price risk

The Group has exposures to the price of base metals arising from business operations. To minimise

its cash ﬂow exposures to changes in commodity prices, the Group enters into derivative commodity

transactions. During 2026, the Group entered into commodity futures contracts for copper, tin and

zinc which had a fair value of £1m at 31 July 2026 (FY2025: £nil). The commodity hedging policy is

similar to the Group FX policy, in that the Group forecasts highly probable exposures to commodities

and takes out hedges within prescribed maximum and minimum levels as set out in the policy. The

maximum and minimum policy bands decline gradually over time. For accounting purposes, these

derivative contracts are generally not designated in hedging relationships.

Sensitivity of cost of sales to commodity price movements

Based on the composition of unhedged commodities at 31 July 2026, and taking into consideration

existing hedges in place, a ten percentage point change in commodity prices for all

base metals

would have a £1m impact (FY2025: £nil impact) on the Group’s profit before tax.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

151

NOTES TO THE ACCOUNTS

CONTINUED

20. Derivative financial instruments

The tables below set out the nominal amount and fair value of derivative contracts held by the

Group, identifying the derivative contracts which qualify for hedge accounting treatment.


	At 31 July 2026
	Contract or	Fair value
	underlying
	nominal
	amount	Assets	Liabilities	Net
	£m	£m	£m	£m
Foreign exchange contracts (cash-flow hedges)	58	–	–	–
Foreign exchange contracts (not hedge accounted)	296	3	(2)	1
Total foreign exchange contracts	354	3	(2)	1
Cross-currency swaps (fair value, net investment and
cash flow hedges)	808	17	(22)	(5)
Commodity derivatives (not hedge accounted)	14	1	–	1
Total financial derivatives	1,176	21	(24)	(3)
Balance sheet entries:
Non-current	590	–	(22)	(22)
Current	586	21	(2)	19
Total financial derivatives	1,176	21	(24)	(3)


	At 31 July 2025
	Contract or	Fair value
	underlying
	nominal
	amount	Assets	Liabilities	Net
	£m	£m	£m	£m
Foreign exchange contracts (cash-flow hedges)	103	2	(1)	1
Foreign exchange contracts (not hedge accounted)	357	5	(1)	4
Total foreign exchange contracts	460	7	(2)	5
Cross-currency swaps (fair value and net investment
hedges)	240	10	–	10
Total financial derivatives	700	17	(2)	15
Balance sheet entries:
Non-current	258	10	–	10
Current	442	7	(2)	5
Total financial derivatives	700	17	(2)	15

Accounting for other derivative contracts

Any foreign exchange contracts which are not formally designated as hedges and tested are

classified as ‘held for trading’ and not hedge accounted.

Netting

International Swaps and Derivatives Association (ISDA) master netting agreements are in place with

derivative counterparties except for contracts traded on a dedicated international electronic trading

platform used for operational foreign exchange hedging. Under these agreements if a credit event

occurs, all outstanding transactions under the ISDA are terminated and only a single net amount

per counterparty is payable in settlement of all transactions. The ISDA agreements do not meet the

criteria for offsetting, since the offsetting is enforceable only if specific events occur in the future,

and there is no intention to settle the contracts on a net basis.


	Assets	Liabilities	Assets	Liabilities
	31 July 2026	31 July 2026	31 July 2025	31 July 2025
	£m	£m	£m	£m
Gross value of assets and liabilities	20	(24)	17	(2)
Related assets and liabilities subject to master netting
agreements	(13)	13	(2)	2
Net exposure	7	(11)	15	–

152

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

The maturity profile, average interest and foreign currency exchange rates of the hedging instruments used in the Group’s hedging strategies are as follows:


			Maturity at 31 July 2026		Maturity at 31 July 2025
			Up to	More than five	Up to
Hedged exposure	Hedging instrument		one year	years	one year	One to five years
Fair value hedges
Interest rate/	Cross-currency swaps (EUR:GBP)	– Notional amount (£m)	254	344	–	254
foreign currency risk		– Historical average exchange rate	0.8450	0.8808	–	0.8450
		– Average spread over three-month GBP SONIA	1.860%	1.385%	–	1.860%
Net investment hedges
Foreign currency risk	Cross-currency swaps (GBP:USD)	– Notional amount (£m)	236	–	–	240
		– Historical average exchange rate	1.2534	–	–	1.2534
Cash-flow hedges
Interest rate/	Cross-currency swaps (EUR:GBP)	– Notional amount (£m)	–	229	–	–
foreign currency risk		– Historical average exchange rate	–	0.8808	–	–
		– Weighted average fixed rate	–	5.136%	–	–
Foreign currency risk	Foreign exchange contracts (USD:GBP)	– Notional amount (£m)	32	–	29	–
		– Average exchange rate	1.3415	–	1.3076	–
	Foreign exchange contracts (GBP:EUR)	– Notional amount (£m)	11	–	15	–
		– Average exchange rate	0.8819	–	0.8729	–
	Foreign exchange contracts (CZK:GBP)	– Notional amount (£m)	12	–	10	–
		– Average exchange rate	27.9025	–	29.4206	–
	Foreign exchange contracts (EUR:USD)	– Notional amount (£m)	–	–	16	–
		– Average exchange rate	–	–	0.8017	–
	Foreign exchange contracts (CHF:EUR)	– Notional amount (£m)	–	–	11	3
		– Average exchange rate	–	–	0.9240	0.9049
	Foreign exchange contracts (AED:EUR)	– Notional amount (£m)	–	–	13	–
		– Average exchange rate	–	–	4.0632	–
	Foreign exchange contracts (AUD:EUR)	– Notional amount (£m)	–	–	4	–
		– Average exchange rate	–	–	1.7473	–

At 31 July 2026, the Group had forward foreign exchange contracts with a nominal value of £58m (FY2025: £103m) designated as cash-flow hedges. These forward foreign exchange contracts are in

relation to sale and purchase of multiple currencies with varying maturities up to 22 July 2027. The largest single currency pairs are disclosed above and make up 95% of the notional hedged exposure.

The notional and fair values of these foreign exchange forward derivatives are shown in the nominal amount and fair value of derivative contracts table on page 151.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

153

NOTES TO THE ACCOUNTS

CONTINUED

21. Fair value of financial instruments


				At fair value		Total
		Basis for	At amortised	through profit	At fair value	carrying	Total
		determining	cost	or loss	through OCI	value	fair value
As at 31 July 2026	Notes	fair value	£m	£m	£m	£m	£m
Financial assets
Other investments	14	A	–	2	–	2	2
Other investments	14	F	–	–	4	4	4
Cash and cash
equivalents	18	B	2,956	–	–	2,956	2,956
Trade and other financial
receivables		B/C	497	–	–	497	497
Derivative financial
instruments	20	A/C	–	21	–	21	21
Total financial assets			3,453	23	4	3,480	3,480
Financial liabilities
Trade and other financial
payables		B	(609)	–	–	(609)	(609)
Short-term borrowings	18	B/D	(563)	–	–	(563)	(563)
Long-term borrowings	18	D	(537)	–	–	(537)	(549)
Lease liabilities	18	E	(104)	–	–	(104)	(104)
Derivative financial
instruments	20	C	–	(24)	–	(24)	(24)
Total financial liabilities			(1,813)	(24)	–	(1,837)	(1,849)

The fair value of a financial instrument is the price at which an asset could be exchanged, or a

liability settled, between knowledgeable, willing parties in an arm’s-length transaction. Fair values

have been determined with reference to available market information at the balance sheet date,

using the methodologies described below:

A

Carrying value is assumed to be a reasonable approximation to fair value for all of these assets

and liabilities (Level 1 as defined by IFRS 13).

B

Carrying value is assumed to be a reasonable approximation to fair value for all of these assets

and liabilities (Level 2 as defined by IFRS 13).

C

Fair values of derivative financial assets and liabilities, and trade receivables held to collect or

sell, are estimated by discounting expected future contractual cash-flows using prevailing

interest rate curves. Amounts denominated in foreign currencies are valued at the exchange rate

prevailing at the balance sheet date. These financial instruments are included on the balance

sheet at fair value, derived from observable market prices (Level 2 as defined by IFRS 13).


				At fair value		Total
		Basis for	At amortised	through profit	At fair value	carrying	Total
		determining	cost	or loss	through OCI	value	fair value
As at 31 July 2025	Notes	fair value	£m	£m	£m	£m	£m
Financial assets
Other investments	14	A	–	1	–	1	1
Other investments	14	F	–	–	5	5	5
Cash and cash
equivalents	18	B	195	–	–	195	195
Trade and other financial
receivables		B/C	744	–	–	744	744
Derivative financial
instruments	20	C	–	17	–	17	17
Total financial assets			939	18	5	962	962
Financial liabilities
Trade and other financial
payables		B	(468)	(14)	–	(482)	(482)
Short-term borrowings	18	B/D	(3)	–	–	(3)	(3)
Long-term borrowings	18	D	(556)	–	–	(556)	(557)
Lease liabilities	18	E	(108)	–	–	(108)	(108)
Derivative financial
instruments	20	C	–	(2)	–	(2)	(2)
Total financial liabilities			(1,135)	(16)	–	(1,151)	(1,152)

D

Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are

valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is

estimated using quoted prices (Level 1 as defined by IFRS 13).

E

Leases are carried at amortised cost. Amounts denominated in foreign currencies are valued at

the exchange rate prevailing at the balance sheet date. The fair value of the lease contract is

estimated by discounting contractual future cash-flows (Level 2 as defined by IFRS 13).

F

The fair value of instruments is estimated by using unobservable inputs to the extent that

relevant observable inputs are not available. Unobservable inputs are developed using the best

information available in the circumstances, which may include the Group’s own data, taking into

account all information about market participation assumptions that is reliably available (Level 3

as defined by IFRS 13).

IFRS 13 defines a three-level valuation hierarchy:

Level 1 – quoted prices for similar instruments

Level 2 – directly observable market inputs other than Level 1 inputs

Level 3 – inputs not based on observable market data

154

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

22. Commitments

At 31 July 2026, commitments, comprising bonds and guarantees arising in the normal course of

business, amounted to £99m (FY2025: £180m), including pension commitments of £44m (FY2025:

£44m) and charitable funding commitments for the Smiths Group Foundation of £25m (FY2025:

£8m). In addition, the Group has committed expenditure on capital projects amounting to £5m

(FY2025: £4m).

At 31 July 2026 the Group had provided its brokers with a non-cancellable instruction to purchase

shares on the Group’s behalf over the year end close period. It has been determined that this

instruction has created a £278m financial liability for the present value of the redemption amount,

this has been accrued for at the year end, see note 24 for further detail.

23. Provisions and contingent liabilities


	Trading	Non-headline and legacy			Total
		John Crane,	Titeflex
		Inc.	Corporation
		litigation	litigation	Other
	£m	£m	£m	£m	£m
At 31 July 2024	13	220	36	25	294
Foreign exchange rate movements	–	(6)	(1)	–	(7)
Provision charged	16	–	1	8	25
Provision released	(4)	(12)	(6)	–	(22)
Unwind of provision discount	–	8	1	–	9
Utilisation	(5)	(19)	(5)	(15)	(44)
Reclassified to liability held for sale	(1)	–	–	–	(1)
At 31 July 2025	19	191	26	18	254
Comprising:
Current liabilities	12	23	7	14	56
Non-current liabilities	7	168	19	4	198
At 31 July 2025	19	191	26	18	254
Foreign exchange rate movements	–	(3)	–	–	(3)
Provision charged	16	–	4	6	26
Provision released	(3)	(30)	-	–	(33)
Unwind of provision discount	–	7	1	–	8
Utilisation	(2)	(12)	(2)	(4)	(20)
Reclassified to liability held for sale
subsequently disposed	(27)	–	–	–	(27)
At 31 July 2026	3	153	29	20	205
Comprising:
Current liabilities	–	20	9	16	45
Non-current liabilities	3	133	20	4	160
At 31 July 2026	3	153	29	20	205

The John Crane, Inc. and Titeflex Corporation litigation provisions were the only provisions that were

discounted; other provisions have not been discounted as the impact would be immaterial.

Trading

The provisions included as trading represent amounts provided for in the ordinary course of

business. Trading provisions are charged and released through headline profit.

Warranty provision and product liability

At 31 July 2026, the Group had warranty and product liability provisions of £1m (FY2025: £17m).

Warranties over the Group’s products typically cover periods of between one and three years.

Provision is made for the likely cost of after-sales support based on the recent past experience of

individual businesses.

Commercial disputes and litigation in respect of ongoing business activities

The Group has on occasion been required to take legal action to protect its intellectual property and

other rights against infringement. It has also had to defend itself against proceedings brought by

other parties, including product liability and insurance subrogation claims. Provision is made for any

expected costs and liabilities in relation to these proceedings where appropriate, although there can

be no guarantee that such provisions (which may be subject to potentially material revision from

time to time) will accurately predict the actual costs and liabilities that may be incurred.

Contingent liabilities

In the ordinary course of its business, the Group is subject to commercial disputes and litigation

such as government price audits, product liability claims, employee disputes and other kinds of

lawsuits, and faces different types of legal issues in different jurisdictions. The high level of activity

in the US, for example, exposes the Group to the likelihood of various types of litigation

commonplace in that country, such as ‘mass tort’ and ‘class action’ litigation, legal challenges to the

scope and validity of patents, and product liability and insurance subrogation claims. These types of

proceedings (or the threat of them) are also used to create pressure to encourage negotiated

settlement of disputes. Any claim brought against the Group (with or without merit) could be costly

to defend. These matters are inherently difficult to quantify. In appropriate cases a provision is

recognised based on best estimates and management judgement but there can be no guarantee

that these provisions (which may be subject to potentially material revision from time to time) will

result in an accurate prediction of the actual costs and liabilities that may be incurred. There are

also contingent liabilities in respect of litigation for which no provisions are made.

The Group operates in some markets where the risk of unethical or corrupt behaviour is material

and has procedures, including an employee ethics alert line, to help it identify potential issues. Such

procedures will, from time to time, give rise to internal investigations, sometimes conducted with

external support, to ensure that the Group properly understands risks and concerns and can take

steps both to manage immediate issues and to improve its practices and procedures for the future.

The Group is not aware of any issues which are expected to generate material financial exposures.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

155

NOTES TO THE ACCOUNTS

CONTINUED

Non-headline and legacy

John Crane, Inc.

John Crane, Inc. (JCI) is one of many co-defendants in numerous lawsuits pending in the United

States in which plaintiffs are claiming damages arising from alleged exposure to, or use of, products

previously manufactured which contained asbestos. Until 2006, the awards, the related interest and

all material defence costs were met directly by insurers. In 2007, JCI secured the commutation of

certain insurance policies in respect of product liability. Provision is made in respect of the expected

costs of defending known and predicted future claims and of adverse judgements in relation

thereto, to the extent that such costs can be reliably estimated.

The JCI products generally referred to in these cases consist of industrial sealing products,

primarily packing and gaskets. The asbestos was encapsulated within these products in such a

manner that causes JCI to understand, based on tests conducted on its behalf, that the products

were safe. JCI ceased manufacturing products containing asbestos in 1985.

JCI continues to actively monitor the conduct and effect of its current and expected asbestos

litigation, including the most efficacious presentation of its ‘safe product’ defence, and intends to

continue to resist these asbestos claims based upon this defence. The table below summarises the

JCI claims experience over the last 45 years since the start of this litigation:

	Year ended	Year ended	Year ended	Year ended	Year ended
	31 July 2026	31 July 2025	31 July 2024	31 July 2023	31 July 2022
JCI claims experience
Claims against JCI that have been dismissed	315,000	313,000	312,000	310,000	306,000
Claims JCI is currently a defendant in	21,000	21,000	20,000	20,000	22,000
Cumulative final judgements, after appeals,
against JCI since 1979	157	157	156	154	149
Cumulative value of awards (US$m)
since 1979	192	192	191	190	175

The number of claims outstanding at 31 July 2026 reflected the benefit of 2,000 (FY2025: 1,000)

claims being dismissed in the year.

JCI has also incurred significant additional defence costs. The litigation involves claims for a

number of allegedly asbestos-related diseases, with awards, when made, for mesothelioma tending

to be larger than those for the other diseases. JCI’s ability to defend mesothelioma cases

successfully is, therefore, likely to have a significant impact on its annual aggregate adverse

judgement and defence costs.

John Crane, Inc. litigation provision

The provision is based on past history of JCI claims and well-established tables of asbestos-related

disease incidence projections. The provision is determined using advice from asbestos valuation

experts, Bates White LLC. The assumptions made in assessing the appropriate level of provision

include: the period over which the expenditure can be reliably estimated; the future trend of legal

costs; the rate of future claims filed; the rate of successful resolution of claims; and the average

amount of judgements awarded.

Established incidence curves can be used to estimate the likely future pattern of asbestos-related

disease. However, JCI’s claims experience is also significantly impacted by other factors which

influence the US litigation environment. These can include: changing approaches on the part of the

plaintiffs’ bar; changing attitudes amongst the judiciary at both trial and appellate levels in specific

jurisdictions which move the balance of risk and opportunity for claimants; and legislative and

procedural changes in both the state and federal court systems.

The projections use a limited time horizon on the basis that Bates White LLC consider that there is

substantial uncertainty in the asbestos litigation environment. So probable expenditures are

not reasonably estimable beyond this time horizon. Asbestos is the longest-running mass tort

litigation in American history and is constantly evolving in ways that cannot be anticipated. JCI’s

defence strategy also generates a significantly different pattern of legal costs and settlement

expenses from other defendants. Thus JCI is in an extremely rare position, and evidence from other

litigation cannot be used to improve the reliability of the projections. A ten-year (FY2025: ten-year)

time horizon has been used based on past experience regarding significant changes in the litigation

environment that have occurred every few years and on the amount of time taken in the past for

some of those changes to impact the broader asbestos litigation environment.

The rate of future claims filed has been estimated using well-established tables of asbestos

incidence projections to determine the likely population of potential claimants, and JCI’s past

experience to determine what proportion of this population will make a claim against JCI. The JCI

products generally referred to in claims had industrial and marine applications. As a result, the

incidence curve used for JCI projections excludes construction workers, and is a composite of the

curves that predict asbestos exposure-related disease from shipyards and other occupations. This

is consistent with JCI’s litigation history.

The rate of successful resolution of claims and the average amount of any judgements awarded are

projected based on the past history of JCI claims, since this is the best available evidence, given

JCI’s strategy of defending all claims.

The future trend of legal costs is estimated based on JCI’s past experience, adjusted to reflect the

assumed levels of claims and trial activity, since the number of trials is a key driver of legal costs.

John Crane, Inc. litigation insurance recoveries

While JCI has certain excess liability insurance, JCI has met defence costs directly. The calculation

of the provision does not take account of any potential recoveries from insurers.

John Crane, Inc. litigation provision sensitivities

The provision may be subject to potentially material revision from time to time if new information

becomes available as a result of future events. There can be no guarantee that the assumptions

used to estimate the provision will result in an accurate prediction of the actual costs that will be

incurred because of the significant uncertainty associated with the future level of asbestos claims

and of the costs arising out of related litigation, including the unpredictability of jury verdicts.

156

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

John Crane, Inc. statistical reliability of projections over the ten-year time horizon

In order to evaluate the statistical reliability of the projections, a population of outcomes is modelled

using randomised verdict outcomes. This generated a distribution of outcomes with future spend at

the 5th percentile of £136m and future spend at the 95th percentile of £187m (FY2025: £170m and

£230m, respectively). Statistical analysis of the distribution of these outcomes indicates that there is

a 50% probability that the total future spend will fall between £172m and £195m (FY2025: between

£214m and £242m), compared to the gross provision value of £187m (FY2025: £231m).

John Crane, Inc. litigation provision history

The JCI asbestos litigation provision of £153m (FY2025: £191m) is a discounted pre-tax provision

using discount rates, being the risk-free rate on US debt instruments for the appropriate period.

The deferred tax asset related to this provision is shown within the deferred tax balance (note 6).

The JCI asbestos litigation provision has developed over the last five years as follows:

	Year ended	Year ended	Year ended	Year ended	Year ended
	31 July 2026	31 July 2025	31 July 2024	31 July 2023	31 July 2022
	£m	£m	£m	£m	£m
John Crane, Inc. litigation provision
Gross provision	187	231	261	246	258
Discount	(34)	(40)	(41)	(42)	(29)
Discounted pre-tax provision	153	191	220	204	229
Deferred tax	(37)	(46)	(54)	(51)	(57)
Discounted post-tax provision	116	145	166	153	172
Operating profit charge/(credit)
(Decreased)/Increased provisions for adverse
judgements and legal defence costs	(27)	(11)	28	28	24
Change in US risk-free rates	(3)	(1)	1	(15)	(18)
Subtotal – items charged to the provision	(30)	(12)	29	13	6
Litigation management, legal and
professional fees in connection with litigation
against insurers and defence strategy	1	–	–	2	1
Recoveries from insurers	–	(1)	(3)	(7)	–
Total operating profit (credit)/charge	(29)	(13)	26	8	7
Cash-flow
Provision utilisation – legal defence costs and
adverse judgements	(12)	(18)	(21)	(32)	(21)
Litigation management expense	–	–	–	(2)	(1)
Recoveries from insurers	–	1	3	7	–
Net cash outflow	(12)	(17)	(18)	(27)	(22)

John Crane, Inc. sensitivity of the projections to changes in the time horizon used

If the asbestos litigation environment becomes more volatile and uncertain, the time horizon over

which the provision can be calculated may reduce. Conversely, if the environment became more

stable, or JCI changed approach and committed to long-term settlement arrangements, the time

period covered by the provision might be extended.

The projections use a ten-year time horizon. Reducing the time horizon by one year would reduce

the provision by £12m (FY2025: £15m) and reducing it by five years would reduce the provision by

£65m (FY2025: £85m).

We consider, after obtaining advice from Bates White LLC, that to forecast beyond ten years requires

that the litigation environment remains largely unchanged with respect to the historical experience

used for estimating future asbestos expenditures. Historically, the asbestos litigation environment

has undergone significant changes more often than every ten years. If one assumed that the

asbestos litigation environment would remain unchanged for longer and extended the time horizon

by one year, it would increase the pre-tax provision by £10m (FY2025: £13m) and extending it by five

years would increase the pre-tax provision by £33m (FY2025: £45m). However, there are also

reasonable scenarios that, given certain recent events in the US asbestos litigation environment,

would result in no additional asbestos litigation for JCI beyond ten years. At this time, how the

asbestos litigation environment will evolve beyond ten years is not reasonably estimable.

John Crane, Inc. contingent liabilities

Provision has been made for future defence costs and the cost of adverse judgements expected to

occur. JCI’s claims experience is significantly impacted by other factors which influence the US

litigation environment. These can include: changing approaches on the part of the plaintiffs’ bar;

changing attitudes amongst the judiciary at both trial and appellate levels; and legislative and

procedural changes in both the state and federal court systems. As a result, whilst the Group

anticipates that asbestos litigation will continue beyond the period covered by the provision, the

uncertainty surrounding the US litigation environment beyond this point is such that the costs

cannot be reliably estimated.

Although the methodology used to calculate the JCI litigation provision can in theory be applied to

show claims and costs for longer periods, the Directors consider, based on advice from Bates White

LLC, that the level of uncertainty regarding the factors used in estimating future costs is too great to

provide for reasonable estimation of the numbers of future claims, the nature of such claims or the

cost to resolve them for years beyond the ten-year time horizon.

Titeflex Corporation

Titeflex Corporation, a subsidiary of the Group in the Flex-Tek business segment, has received a

number of claims in the US from insurance companies seeking recompense on a subrogated basis

for the effects of damage allegedly caused by lightning strikes in relation to its flexible gas piping

product. It has also received product liability claims regarding this product in the US, some in the

form of purported class actions. Titeflex Corporation believes that its products are a safe and

effective means of delivering gas when installed in accordance with the manufacturer’s instructions

and local and national codes. However, some claims have been settled on an individual basis

without admission of liability. Equivalent third-party products in the US marketplace face

similar challenges.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

157

NOTES TO THE ACCOUNTS

CONTINUED

Titeflex Corporation litigation provision

The continuing progress of claims and the pattern of settlement, together with recent marketplace

activity, provide sufficient evidence to recognise a liability in the accounts. Therefore a provision has

been made for the costs which the Group is expected to incur in respect of future claims to the

extent that such costs can be reliably estimated. Titeflex Corporation sells flexible gas piping with

extensive installation and safety guidance designed to assure the safety of the product and minimise

the risk of damage associated with lightning strikes.

The assumptions made in assessing the appropriate level of provision, which are based on past

experience, include: the period over which expenditure can be reliably estimated; the number of

future settlements; the average amount of settlements; and the impact of statutes of repose and

safe installation initiatives on the expected number of future claims.

The provision of £29m (FY2025: £26m) is a discounted pre-tax provision using discount rates, being

the risk-free rate on US debt instruments for the appropriate period. The deferred tax asset related

to this provision is shown within the deferred tax balance (note 6).


	31 July 2026	31 July 2025
	£m	£m
Gross provision	63	56
Discount	(34)	(30)
Discounted pre-tax provision	29	26
Deferred tax	(7)	(6)
Discounted post-tax provision	22	20

Titeflex Corporation litigation provision history

A charge of £4m (FY2025: £5m credit) has been recognised by Titeflex Corporation in respect of

changes to the estimated cost of future claims from insurance companies seeking recompense for

damage allegedly caused by lightning strikes. The higher gross provision value has been principally

driven by an increase in the number of claims.

Other non-headline and legacy provisions

Non-headline provisions comprise all provisions that were disclosed as non-headline items when

they were charged to the consolidated income statement. Legacy provisions comprise non-material

provisions relating to former business activities and discontinued operations and properties no

longer used by Smiths.

These non-material provisions include non-headline reorganisation, disposal indemnities, litigation

and arbitration in respect of old products and discontinued business activities. Provision is made

for the best estimate of the expected expenditure related to the defence and/or resolution of such

matters. There is an inherent risk in legal proceedings that the outcome may be unfavourable to the

Group, and as such there can be no guarantee that such provisions (which may be subject to

potentially material revision from time to time) will be sufficient.

Reorganisation

At 31 July 2026, there were reorganisation provisions of £3m (FY2025: £5m) relating to the various

restructuring programmes that are expected to be utilised in the next 18 months.

Property

At 31 July 2026, there were provisions of £10m (FY2025: £7m) related to actual and potential

environmental issues for sites currently or previously occupied by Smiths operations.

24. Share capital


		Issued
		capital	Consideration
	Number of shares	£m	£m
Ordinary shares of 37.5p each
Total share capital at 31 July 2024	345,097,794	130
Share buybacks	(15,413,491)	(6)	(303)
Total share capital at 31 July 2025	329,684,303	124
Share buybacks	(33,877,205)	(13)	(839)
Total share capital at 31 July 2026	295,807,098	111

Share capital structure

As at 31 July 2026, the Company’s issued share capital was 295,807,098 ordinary shares with a

nominal value of 37.5p per share. All of the issued share capital was in free issue and all issued

shares are fully paid.

The Company’s ordinary shares are listed and admitted to trading on the Main Market of the London

Stock Exchange. The Company has an American Depositary Receipt (ADR) programme and one

ADR equates to one ordinary share. As at 31 July 2026, 5,057,587 ordinary shares were held by the

nominee of the programme in respect of the same number of ADRs in issue.

The holders of ordinary shares are entitled to receive the Company’s Reports and Accounts, to

attend and speak at General Meetings of the Company, to appoint proxies and to exercise voting

rights. None of the ordinary shares carry any special rights with regard to control of the Company

or distributions made by the Company.

There are no known agreements relating to, or restrictions on, voting rights attached to the ordinary

shares (other than the 48-hour cut-off for casting proxy votes prior to a General Meeting). There are

no restrictions on the transfer of shares, and there is no requirement to obtain approval for a share

transfer. There are no known arrangements under which financial rights are held by a person other

than the holder of the ordinary shares. There are no known limitations on the holding of shares.

Powers of Directors

The Directors are authorised to issue and allot shares and to buy back shares subject to receiving

shareholder approval at general meetings. Existing authorities to allot shares were granted at the

2025 Annual General Meeting. The current authority to make market purchases of ordinary shares

was granted at the General Meeting held on 23 July 2026. At the 2026 Annual General Meeting, it

will be proposed that the Directors be granted new authorities to issue and allot shares and to buy

back shares.

158

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Share buybacks

As at 9 September 2026 (the latest practicable date for inclusion in this report), the Company had an

unexpired authority to repurchase ordinary shares up to a maximum of 34.0 million ordinary shares

(FY2025: 17.2 million). As at 9 September 2026, the Company did not hold any shares in treasury. Any

ordinary shares purchased may be cancelled or held in treasury.

On 26 March 2024, the Company announced a £100m share buyback programme to purchase

ordinary shares in the capital of the Company. The programme was extended to £500m, on

31 January 2025. The additional £350m commenced on 25 March 2025 and completed on

3 December 2025. During the current period, the Group purchased and cancelled 6,579,144 shares

for a total consideration of £159m.

On 19 November 2025, the Group announced a new £1bn share buyback programme to commence

after the completion of the previous programme. During the current period, the Group purchased

and cancelled 27,298,061 shares for a total consideration of £680m. At 31 July 2026 1,561,624 shares

were yet to settle and be cancelled, this has created a £41m financial liability that has been accrued

for at the year end.

A further 8,928,434 ordinary shares have been repurchased during the period of 1 August 2026 to

9 September 2026. In total since the start of the £1bn Programme, 37,788,119 shares have been

repurchased, for a total consideration of £951m, representing 12% of the called-up ordinary share

capital outstanding at the start of the Programme.

At 31 July 2026 the Group had provided its brokers with a non-cancellable instruction to purchase

shares on the Group’s behalf over the year end close period.

It has been determined that this

instruction has created a £278m financial liability for the present value of the redemption amount,

this has been accrued for at the year end.

Employment share schemes

Shares acquired through Company share schemes and plans rank pari passu with the shares in

issue and have no special rights. The Company operates an Employee Benefit Trust, with an

independent trustee, to hold shares pending employees becoming entitled to them under the

Company’s share schemes and plans. On 31 July 2026, the Trust held 1,493,880 (FY2025: 1,662,267)

ordinary shares in the Company. The Trust waived its dividend entitlement on its holding during the

year, and the Trust abstains from voting any shares held at General Meetings.

25. Dividends

The following dividends were declared and paid in the period:

	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Ordinary final dividend of 31.77p (FY2025: 30.2p) paid 21 November 2025	103	104
Ordinary interim dividend of 15.00p (FY2025: 14.23p) paid 13 May 2026	46	48
	149	152

In the current year a final dividend of 31.77p was paid in respect of FY2025 and an interim dividend of

15.00p was paid in respect of FY2026. In the prior year a total dividend of 44.43p was paid,

comprising a final dividend of 30.2p paid in respect of FY2024 and an interim dividend of 14.23p paid

in respect of FY2025.

The final dividend for the year ended 31 July 2026 of 33.5p per share was recommended by the

Board on 21 September 2026 and will be paid to shareholders on 23 November 2026, subject to

approval by the shareholders. This dividend is payable to all shareholders on the register of

members at 6.00pm on 16 October 2026 (the record date).

Waiver of dividends

WBS Client Nominees Limited (Smiths Industries Employee Share Trust) waived all dividends

payable in the year, and all future dividends, on their shareholdings in the Company.

26. Reserves

Retained earnings include the value of Smiths Group plc shares held by the Smiths Industries

Employee Benefit Trust. In the year the Company issued nil (FY2025: nil) shares to the Trust, the

Trust purchased 1,822,575 shares (FY2025: 1,318,518 shares) in the market for a consideration of

£43m (FY2025: £23m) and redeemed 1,990,962 shares (FY2025: 1,044,561) to employees for a

cumulative option cost of £2m (FY2025: £1m). At 31 July 2026, the Trust held 1,493,880 (FY2025:

1,662,267 ) ordinary shares.

Other reserves comprise the capital redemption reserve and merger reserve, which arose from

share repurchases, revaluations of property, plant and equipment, and merger accounting for

business combinations before the adoption of IFRS, respectively.

Capital management

Capital employed comprises total equity adjusted for goodwill recognised directly in reserves, net

retirement benefit-related assets and liabilities, net litigation provisions relating to non-headline

items and net debt. The efficiency of the allocation of capital to the divisions is monitored through

the return on capital employed (ROCE). This ratio is calculated over a rolling 12-month period and is

the percentage that headline operating profit comprises of monthly average capital employed. In

FY2026 ROCE for continuing operations was 23.5% (FY2025: 24.5%); see note 30.

Capital structure is based on the Directors’ judgement of the balance required to maintain flexibility,

whilst achieving an efficient cost of capital.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

159

NOTES TO THE ACCOUNTS

CONTINUED

The FY2026 ratio of net cash to headline EBITDA of 3.9 (FY2025: 0.6 net debt) is within the Group’s

stated policy of 2.0 or less over the medium term. The Group’s robust balance sheet and record of

strong cash generation are more than able to fund immediate investment needs and legacy

obligations. See note 30 for the definition of headline EBITDA and the calculation of this ratio.

As part of its capital management, the Group maintains a solid investment grade credit rating to

ensure access to the widest possible sources of financing and to optimise the resulting cost of

capital. At 31 July 2026, the Group had a credit rating of BBB/Baa2 (FY2025: BBB+/Baa2) with

Standard & Poor’s and Moody’s respectively.

The Board has a progressive dividend policy for future payouts, with the aim of increasing dividends

in line with the long-term underlying growth in earnings. In setting the level of dividend payments,

the Board will take into account prevailing economic conditions and future investment plans, along

with the objective to maintain a minimum dividend cover of at least two times.

Hedge reserve

The hedge reserve on the balance sheet records the cumulative gain or loss on designated hedging

instruments, and comprises:


	31 July 2026	31 July 2025
	£m	£m
Net investment hedge reserve	(83)	(191)
Deferred tax on net investment hedge reserve	7	7
Cashflow hedge reserve	1	1
Hedge reserve total	(75)	(183)

See transactional currency exposure risk management disclosures in note 19 for additional details

of cash-flow hedges, and translational currency exposure risk management disclosure also in note

19 for additional details of net investment hedges.

Non-controlling interest

The Group has recorded non-controlling interests of £23m (FY2025: £24m), of which the most

significant balance is in John Crane Japan Inc., which represented £23m (FY2025: £22m) of the total

non-controlling interests.

The non-controlling interest in John Crane Japan Inc. represents a 30% interest. John Crane

Japan Inc. generated operating profits of £11m in the period (FY2025: £10m), and cash inflows from

operating activities of £10m (FY2025: £6m). It paid dividends of £2m (FY2025: £1m) and tax of £3m

(FY2025: £2m). At 31 July 2026, the company contributed £59m (FY2025: £57m) of net assets to

the Group.

27. Acquisitions

On 1 April 2026 the Group acquired 100% of the share capital of DRC Heat Transfer (DRC).

DRC is a US-based designer and manufacturer of custom heat transfer and cooling solutions and

will be integrated into the Flex-Tek business to extend Flex-Tek’s offering into cooling applications,

adding broader thermal solutions capabilities and strengthen Flex-Tek’s presence in the power

generation market.

The total cash consideration for this acquisition was £165m.

The acquisition was financed using the Group’s own cash resources. The intangible assets

recognised on acquisition comprise customer relationships, trade names and order backlog.

Goodwill represents the expected synergies from the strategic fit of the acquisition and the value of

the expertise in the assembled workforce.

From the date of acquisition to 31 July 2026, DRC contributed £36m to revenue and £8m to profit

before taxation and amortisation. If the Group had acquired DRC at the beginning of the financial

year, the acquisition would have contributed an additional £55m to revenue and £4m to profit before

taxation and amortisation.

The balances at the date of acquisition have been provided in the table below. The amounts related

to working capital are provisional as these have adjustments that have not been finalised as at the

year end.


		Total
		£m
Non-current assets	– acquired intangible assets	109
	– land and buildings	1
	– plant and machinery	5
	– right of use assets	4
Current assets	– inventory	13
	– trade and other receivables	14
	– cash and cash equivalents	6
	– commodity derivatives	1
Current liabilities	– trade and other payables	(16)
Non-current liabilities	– lease liability	(4)
Net assets acquired		133
Goodwill on current period acquisitions		32
Total consideration		165

160

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

28. Discontinued operations and businesses held for sale

On 31 January 2025 Smiths Group plc announced the intention to divest of the Smiths Interconnect

business in the calendar year 2025 and that Smiths Detection would be separated either by UK

demerger or sale following the sale of Smiths Interconnect. For the FY2025 annual report and

accounts it was concluded that the Smiths Interconnect businesses met the classification criteria

for discontinued operations and held for sale, whilst Smiths Detection separation was not yet

sufficiently advanced for the Smiths Detection business to be accounted for as a discontinued

operation or a business held for sale or distribution to owners.

During FY2026 Smiths Group plc completed on both the sale of the Smiths Interconnect and Smiths

Detection businesses. Additionally the Group has commenced a disposal programme for certain

Flex-Tek’s general industrial businesses, the sale of half of the businesses in this programme have

completed in FY2026, the programme is anticipated to be concluded within Calendar Year 2026.

Smiths Interconnect and Smiths Detection are separate major lines of business for the Group and

therefore are presented as discontinued operations, together with the Flex-Tek general industrial

businesses which form part of the Group’s wider strategic portfolio optimisation programme. The

Flex-Tek general industrial businesses divestment project has progressed sufficiently for this

disposal group to be accounted for as a business held for sale.

Discontinued operations

The financial performance of discontinued operations in the current and prior years is presented

below:


	Year ended 31 July 2026			Year ended 31 July 2025
		Non-headline			Non-headline
	Headline	(note3)	Total	Headline	(note 3)	Total
	£m	£m	£m	£m	£m	£m
Revenue	1,220	–	1,220	1,438	–	1,438
Operating costs	(1,011)	1,671	660	(1,246)	(64)	(1,310)
Impairment loss on held for
sale reclassification	–	(11)	(11)	–	(30)	(30)
Operating profit/(loss)	209	1,660	1,869	192	(94)	98
Finance costs	1	(1)	–	(4)	(1)	(5)
Profit/(loss) before taxation	210	1,659	1,869	188	(95)	93
Taxation*	(57)	3	(54)	(55)	–	(55)
Profit/(loss) from discontinued
operations	153	1,662	1,815	133	(95)	38

*

The statutory ETR for discontinuing operations is 2.8% (FY2025: 59.1%) which was significantly influenced by material

non-headline items in the period, principally the non-taxable gains arising on the disposal of Smiths Detection and

Smiths Interconnect, which both qualify for the UK Substantial Shareholding Exemption (SSE); and non-deductible

costs associated with these disposals.

Additional segmental information for discontinued operations


	Year ended 31 July 2026
Smiths	Smiths
	Interconnect	Detection	Other*	Total
	£m	£m	£m	£m
Revenue	244	921	55	1,220
Headline operating profit/(loss)	58	154	(3)	209
Items excluded from headline measures (note 3)	877	794	(11)	1,660
Operating profit/(loss)	935	948	(14)	1,869
Operating profit for the period is stated after charging:
Depreciation	–	7	2	9
Amortisation	–	10	–	10
Impairment loss on held for sale reclassification	–	–	11	11
Gain on sale of discontinued operations	(877)	(807)	(6)	(1,690)
Reconciliation of headline operating profit to
reported underlying headline operating profit:
Headline operating profit/(loss)	58	154	(3)	209
IFRS 5 held for sale adjustments**	(8)	(28)	–	(36)
Reported underlying headline operating profit/(loss)**	50	126	(3)	173


	Year ended 31 July 2025
	Smiths	Smiths
	Interconnect	Detection	Other*	Total
	£m	£m	£m	£m
Revenue	364	963	111	1,438
Headline operating profit/(loss)	80	122	(10)	192
Items excluded from headline measures (note 3)	(11)	(36)	(47)	(94)
Operating profit/(loss)	69	86	(57)	98
Operating profit for the period is stated after charging:
Depreciation	8	19	5	32
Amortisation	3	39	1	43
Impairment loss on held for sale reclassification	–	–	30	30
Impairment of prior year working capital balances	–	–	15	15
Reconciliation of headline operating profit to
reported underlying headline operating profit:
Headline operating profit/(loss)	80	122	(10)	192
IFRS 5 held for sale adjustments**	–	–	–	–
Reported underlying headline operating profit/(loss)**	80	122	(10)	192

*

The ‘other’ column comprises the results of certain Flex-Tek general industrial businesses and Smiths Interconnect,

Inc (SII), Interconnect’s US sub-systems business.

** IFRS 5 held for sale adjustments include the add back of headline amortisation/depreciation that IFRS 5 requires to

be paused for businesses held for sale.

Reported underlying headline operating profit/loss is a pro-forma metric that

presents operating profit including these charges to aid year-on-year comparability of results

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

161

NOTES TO THE ACCOUNTS

CONTINUED

Gain on sale of discontinued operations

The sale of Smiths Interconnect completed on 31 March 2026, the sale of Smiths Detection

completed on 30 June 2026, the sale of some Flex-Tek general industrial businesses completed on

8 June 2026 and the sale of SII, Interconnect’s US sub-systems business completed on 1 October

2025.

The effect of these disposals on the financial position of the Group is as follows:

	Smiths	Smiths
	Interconnect	Detection	Other	Total
	£m	£m	£m	£m
Intangible assets	276	750	–	1,026
Property, plant and equipment	53	54	4	111
Right of use assets	11	30	1	42
Financial assets	–	1	–	1
Inventories	85	332	16	433
Deferred tax assets	2	24	–	26
Current tax receivable	2	6	–	8
Trade and other receivables	71	345	16	432
Cash and cash equivalents	51	29	3	83
Financial derivatives	–	(1)	–	(1)
Lease liabilities	(10)	(27)	(3)	(40)
Trade and other payables	(75)	(348)	(11)	(434)
Current tax payable	(7)	(34)	–	(41)
Deferred tax liabilities	(5)	(32)	(1)	(38)
Retirement benefit obligations	(1)	(37)	–	(38)
Provisions	(1)	(27)	–	(28)
Net assets disposed of	452	1,065	25	1,542
Consideration received:
Cash and cash equivalents received	1,345	1,964	19	3,328
Cash and cash equivalents deferred – due to working
capital adjustments	(3)	–	3	–
Transaction costs and separation expenses	(40)	(90)	(1)	(131)
Cash and cash equivalents, net of transaction costs	1,302	1,874	21	3,197
Gain/(loss) on sale before reclassification of foreign
currency translation reserve	850	809	(4)	1,655
Exchange movements recycled to the income statement	42	74	25	141
Net Investment hedge reserve recycled to the income
statement	(15)	(76)	(15)	(106)
Gain on sale of discontinued operation	877	807	6	1,690

	Smiths	Smiths
	Interconnect	Detection	Other	Total
	£m	£m	£m	£m
Cash-flows from operating activities arising on disposal:
Transaction costs and separation expenses paid in period	(41)	(67)	(1)	(109)
Cash-flows from investing activities arising on disposal:
Consideration received in cash and cash equivalents	1,345	1,964	19	3,328
Less cash and cash equivalents disposed of	(51)	(29)	(3)	(83)
	1,294	1,935	16	3,245

Smiths Detection acquisition of Med Graphix, Inc

In August 2025, Smiths Detection completed the acquisition of 100% of the assets of Med Graphix,

Inc. for consideration of £6m. The business acquisition created £6m of goodwill. The acquisition will

provide repair and refurbishment services for Smiths Detection in North America.

Additional segmental information for discontinued operations

Revenue by destination for the Smiths Detection discontinued operations is analysed as follows:

Americas £362m (FY2025: £395m), Europe £254m (FY2025: £243m), APAC £144m (FY2025: £172m)

and ROW £162m (FY2025: £154m). Revenue by destination for the Smiths Interconnect

discontinued

operations is analysed as follows: Americas £109m (FY2025: £214m), Europe £51m (FY2025: £76m),

APAC £82m (FY2025: £116m) and ROW £10m (FY2025: £15m).

The capital expenditure on property, plant and equipment, capitalised development and other

intangible assets for discontinued operations is £28m (FY2025: £29m).

Cash-flow from discontinued operations

Cash-flow from discontinued operations, included in the consolidated cash-flow statement is as

follows:

	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Net cash inflow from operating activities	(13)	164
Net cash-flow used in investing activities	(30)	(29)
Net cash-flow used in financing activities*	2	(50)
Net increase in cash and cash equivalents	(41)	85
Opening cash and cash equivalents in disposal group	152	74
Foreign exchange movements	(28)	(7)
Cash and cash equivalents disposed of	83	–
Cash and cash equivalents at close of period	–	152

* Net cash-flow used in financing activities for discontinued operations includes £23m inflow (FY2025: £28m outflow) of

cashflows from intragroup financing with continuing operations.

162

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Businesses held for sale

At 31 July 2026 the remaining Flex-Tek general industrial disposal group has been classified as held

for sale. The comparatives show the SII and the rest of the Smiths Interconnect disposal groups

which met the held for sale criteria at 31 July 2025. The carrying value of the assets and liabilities of

these disposal groups are as follows:


	31 July 2026	31 July 2025
	£m	£m
Assets classified as held for sale:
Intangible assets	–	278
Property, plant and equipment	3	43
Right of use assets	2	6
Inventories	4	74
Deferred tax assets	1	1
Current tax receivable	–	2
Trade and other receivables	3	72
Cash and cash equivalents	–	31
Assets classified as held for sale	13	507
Liabilities classified as held for sale:
Financial liabilities - leases	(2)	(10)
Trade and other payables	(5)	(83)
Current tax payable	–	(6)
Deferred tax liabilities	–	(6)
Provisions for liabilities and charges	–	(1)
Liabilities classified as held for sale	(7)	(106)

29. Cash-flow

Cash-flow from operating activities


	Year ended 31 July 2026			Year ended 31 July 2025 – represented*
	Headline	Non-headline	Total	Headline	Non-headline	Total
	£m	£m	£m	£m	£m	£m
Operating profit:
– continuing operations	399	(110)	289	388	(41)	347
– discontinued operations	209	1,660	1,869	192	(94)	98
Amortisation of intangible assets	7	39	46	25	52	77
Impairment on held for sale
reclass	–	11	11	–	30	30
Depreciation of property, plant
and equipment	25	1	26	43	2	45
Depreciation of right of use
assets	27	–	27	34	–	34
Loss on disposal of property,
plant and equipment	(1)	–	(1)	2	–	2
Gain on disposal of businesses	–	(1,690)	(1,690)	–	–	–
Disposal transaction costs and
separation expenses	–	(131)	(131)	–	–	–
Share-based payment expense	17	7	24	21	–	21
Retirement benefits**	2	51	53	4	(7)	(3)
Loss on financial asset disposal	–	–	–	–	3	3
Cash flow hedge recycling	–	–	–	(2)	–	(2)
Decrease/(increase) in
inventories	(57)	–	(57)	(20)	4	(16)
Decrease/(increase) in trade
and other receivables	(73)	(4)	(77)	(35)	35	–
Increase/(decrease) in trade
and other payables	(11)	23	12	(5)	7	2
Increase/(decrease) in
provisions	12	(39)	(27)	9	(55)	(46)
Cash generated from
operations	556	(182)	374	656	(64)	592
Interest paid	(65)	–	(65)	(63)	–	(63)
Interest received	40	–	40	40	–	40
Tax paid	(108)	–	(108)	(113)	–	(113)
Net cash inflow from operating
activities	423	(182)	241	520	(64)	456
– continuing operations	317	(63)	254	334	(42)	292
– discontinued operations	106	(119)	(13)	186	(22)	164

*

The comparatives for the year to 31 July 2025 have been represented to reflect the reclassification of the Smiths

Detection and certain Flex-Tek general industrial businesses as discontinued operations

** The retirement benefits within non-headline operating activities principally relate to employer contributions to legacy

defined benefit and post-retirement healthcare plans.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

163

NOTES TO THE ACCOUNTS

CONTINUED

Headline cash measures

The Group measure of headline operating cash excludes interest and tax, and includes capital

expenditure supporting organic growth. The Group uses operating cash-flow for the calculation

of cash conversion and free cash-flow for management of capital purposes. See note 30 for

additional details.

The table below reconciles the Group’s net cash-flow from operating activities to headline operating

cash-flow and free cash-flow:


	Year ended 31 July 2026			Year ended 31 July 2025
	Headline	Non-headline	Total	Headline	Non-headline	Total
	£m	£m	£m	£m	£m	£m
Net cash inflow from
operating activities	423	(182)	241	520	(64)	456
Include:
Expenditure on capitalised
development, other intangible
assets and property, plant and
equipment	(67)	–	(67)	(80)	–	(80)
Repayment of lease liabilities	(41)	–	(41)	(41)	–	(41)
Disposals of property, plant
and equipment	8	–	8	–	–	–
Investment in financial assets	(1)	–	(1)	–	–	–
Transaction costs and
separation-related expenses
for strategic divestments	–	114	114	–	–	–
Funding of charitable
foundation	–	2	2	–	1	1
Free cash-flow			256			336
Exclude:
Investment in financial assets	1	–	1	–	–	–
Repayment of lease liabilities	41	–	41	41	–	41
Interest paid	65	–	65	63	–	63
Interest received	(40)	–	(40)	(40)	–	(40)
Tax paid	108	–	108	113	–	113
Transaction costs and
separation-related expenses
for strategic divestments	–	(114)	(114)	–	–	–
Funding of charitable
foundation	–	(2)	(2)	–	(1)	(1)
Operating cash-flow	497	(182)	315	576	(64)	512
– continuing operations	384	(63)	321	377	(42)	335
– discontinued operations	113	(119)	(6)	199	(22)	177

Headline cash conversion – continuing operations

Headline operating cash conversion for the Group’s continuing operations is calculated as follows:


	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Headline operating profit	399	388
Headline operating cash-flow	384	377
Headline operating cash conversion	96%	97%

Reconciliation of free cash-flow to net movement in cash and cash equivalents:


	Year ended	Year ended
	31 July 2026	31 July 2025
	£m	£m
Free cash-flow	256	336
Disposal of financial assets	–	53
Disposal of subsidiaries – post-sale expenses	–	(12)
Disposal of businesses	3,245	–
Acquisition of businesses	(159)	(121)
Acquisition of business - discontinued operation	(6)	–
Acquisition of business - deferred consideration	(11)	–
Transaction costs and separation-related expenses for strategic
divestments	(114)	–
Funding of charitable foundation	(2)	(1)
Other net cash-flows used in financing activities
(note: repayment of lease liabilities is included in free cash-flow)	(468)	(476)
Net (decrease)/increase in cash and cash equivalents	2,741	(221)

30. Alternative performance measures and key performance indicators

The Group uses several alternative performance measures (APMs) in order to provide additional

useful information on underlying trends and the performance and position of the Group. APMs are

non-GAAP and not defined by IFRS; therefore, they may not be directly comparable with other

companies’ APMs and should not be considered a substitute for IFRS measures.

The Group uses these measures, which are common across the industry, for planning and

reporting purposes, to enhance the comparability of information between reporting periods and

business units. The measures are also used in discussions with the investment analyst community

and by credit rating agencies.

164

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

We have identified and defined the following key measures which are used within the business by

management to assess the performance of the Group’s businesses:

APM term	Definition and purpose
Capital employed	Capital employed is a non-statutory measure of invested resources.
	It comprises statutory net assets and is adjusted as follows:
	– To add goodwill recognised directly in reserves in respect of subsidiaries
	acquired before 1 August 1998; and
	– To eliminate post-retirement benefit assets and liabilities and non-
	headline litigation provisions related to John Crane, Inc. and Titeflex
	Corporation, both net of deferred tax, and net debt.
	It is used to monitor capital allocation within the Group. See below for a
	reconciliation from net assets to capital employed.
Capital expenditure	Comprises additions to property, plant and equipment, capitalised
	development and other intangible assets, excluding assets acquired
	through business combinations: see note 1 for an analysis of capital
	expenditure. This measure quantifies the level of capital investment into
	ongoing operations.
Headline operating profit	HOP comprises divisional earnings before central costs, finance costs and
(HOP)	taxation. HOP is used to monitor divisional performance.
	A reconciliation of HOP to operating profit is shown in note 1.
Free cash-flow	Free cash-flow is calculated by adjusting the net cash inflow from
	operating activities to include capital expenditure, the repayment of lease
	liabilities, the proceeds from the disposal of property, plant and equipment
	and the investment in financial assets relating to operating activities.
	The measure shows cash generated by the Group before discretionary
	expenditure on acquisitions and returns to shareholders. A reconciliation of
	free cash-flow is shown in note 29.
Gross debt	Gross debt is total borrowings (bank, bonds and lease liabilities). It is used
	to provide an indication of the Group's overall level of indebtedness. See
	note 18 for an analysis of gross debt.
Headline	The Group has defined a 'headline' measure of performance that excludes
	material non-recurring items or items considered non-operational/
	trading in nature. Items excluded from headline are referred to as non-
	headline items. This measure is used by the Group to measure and monitor
	performance excluding material non-recurring items or items considered
	non-operational. See note 3 for an analysis of non-headline items.

APM term	Definition and purpose
Headline EBITDA	EBITDA is a widely used profit measure, not defined by IFRS, being
	earnings before interest, taxation, depreciation and amortisation. A
	reconciliation of headline operating profit to headline EBITDA is shown in
	the note below.
Net debt	Net debt is total borrowings (bank, bonds and lease liabilities) less cash
	balances and derivatives used to manage the interest rate risk and
	currency profile of the debt. This measure is used to provide an indication
	of the Group's overall level of indebtedness and is widely used by investors
	and credit rating agencies. See note 18 for an analysis of net cash/(debt).
Non-headline	The Group has defined a 'headline' measure of performance that excludes
	material non-recurring items or items considered non-operational/trading
	in nature. Items excluded from headline are referred to as non-headline
	items. This is used by the Group to measure and monitor material non-
	recurring items or items considered non-operational. See note 3 for an
	analysis of non-headline items.
Operating cash-flow	Comprises free cash-flow and excludes cash-flows relating to the
	repayment of lease liabilities, interest and taxation. The measure shows
	how cash is generated from operations in the Group. A reconciliation of
	operating cash-flow is shown in note 29.
Operating profit	Operating profit is earnings before finance costs and tax. A reconciliation
	of operating profit to profit before tax is shown on the income statement
	on page 107. This common measure is used by the Group to measure and
	monitor performance.
Return on capital	Smiths ROCE is calculated over a rolling 12-month period and is the
employed (ROCE)	percentage that headline operating profit represents of the monthly
	average capital employed on a rolling 12-month basis. This measure of
	return on invested resources is used to monitor performance and capital
	allocation within the Group. See below for Group ROCE and note 1 for
	divisional headline operating profit and divisional capital employed.

The key performance indicators (KPIs) used by management to assess the performance of the

Group’s businesses are as follows:

KPI term	Definition and purpose
Dividend cover –	Dividend cover is the ratio of headline earnings per share (see note 5) to
headline	dividend per share (see note 25). This commonly used measure indicates
	the number of times the dividend in a financial year is covered by headline
	earnings.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

165

NOTES TO THE ACCOUNTS

CONTINUED

KPI term	Definition and purpose
Headline Earnings per	Headline EPS growth is the growth in headline basic EPS (see note 5), on
share (EPS) growth	a reported basis. Headline EPS growth is used to measure and monitor
	performance.
Free cash-flow (as a % of	This measure is defined as free cash-flow divided by headline operating
operating profit)	profit averaged over a three-year performance period. This cash
	generation measure is used by the Group as a performance measure for
	remuneration purposes.
Greenhouse gas (GHG)	GHG reduction is calculated as the percentage change in absolute Scope
emissions reduction	1 & 2 GHG emissions. This measure is used to monitor environmental
	performance.
My Say engagement	The overall score in our My Say employee engagement survey. The
score	biannual survey is undertaken Group-wide. This measure is used by the
	Group to monitor employee engagement.
Operating cash	Comprises headline operating cash-flow, excluding restructuring costs,
conversion	as a percentage of headline operating profit. This measure is used to show
	the proportion of headline operating profit converted into cash-flow from
	operations before investment, finance costs, non-headline items and
	taxation. The calculation is shown in note 29.
Operating profit margin	Operating profit margin is calculated by dividing headline operating profit
	by revenue. This measure is used to monitor the Group’s ability to drive
	profitable growth and control costs.
Organic growth	Organic growth adjusts the movement in headline performance to exclude
	the impact of foreign exchange and acquisitions. Organic growth is used by
	the Group to aid comparability when monitoring performance.
Organic revenue growth	Organic revenue growth (remuneration) is compounded annualised growth
(remuneration)	in revenue after excluding the impact of foreign exchange and acquisitions.
	The measure used for remuneration differs from organic revenue growth
	in that it is calculated on a compounded annualised basis. This measure
	has historically been used by the Group for aligning remuneration with
	business performance.
Percentage of senior	Percentage of senior leadership positions taken by females is calculated
leadership positions	as the percentage of senior leadership roles (G14+ group) held by females.
taken by females	This measure is used by the Group to monitor diversity performance.
RD&E cash costs as a %	This measure is defined as the cash cost of research, development,
of sales	and customer-specific engineering activities (RD&E) as a percentage of
	revenue. RD&E includes capitalised RD&E, RD&E directly charged to the
	P&L and customer-funded projects. Innovation is an important driver of
	sustainable growth for the Group and this measures our investment in
	research and development to drive innovation.

KPI term	Definition and purpose
Recordable Incident Rate	Recordable Incident Rate is calculated as the number of recordable
(RIR)	incidents – where an incident requires medical attention beyond first aid
	– per 100 colleagues, per year across Smiths. This measure is used by the
	Group to monitor health and safety performance.

Capital employed

Capital employed is a non-statutory measure of invested resources. It comprises statutory net

assets adjusted to add goodwill recognised directly in reserves in respect of subsidiaries acquired

before 1 August 1998 of £433m (FY2025: £478m), to eliminate post-retirement benefit assets and

liabilities and non-headline litigation provisions related to John Crane, Inc. and Titeflex Corporation,

both net of related tax, and net debt.

		31 July 2026	31 July 2025
	Notes	£m	£m
Net assets		2,605	2,060
Adjust for:
Goodwill recognised directly in reserves		433	478
Retirement benefit assets and obligations	8	48	(32)
Tax related to retirement benefit assets and obligations		(1)	18
John Crane, Inc. litigation provisions and related tax	23	116	145
Titeflex Corporation litigation provisions and related tax	23	22	20
Net (cash)/debt (excludes £2m of net debt held in discontinued
operations)	18	(1,747)	441
Capital employed		1,476	3,130

Return on capital employed (ROCE)

		Year ended	Year ended
		31 July 2026	31 July 2025
	Notes	£m	£m
Headline operating profit for previous 12 months – including
discontinued operations		608	580
Amortisation and depreciation paused under IFRS5		(36)	–
		572	580
Average capital employed – total Group	1	3,014	3,204
ROCE - total Group		19.0%	18.1%
Continuing Operations ROCE		23.5%	24.5%

166

Smiths Group plc Annual Report FY2026

NOTES TO THE ACCOUNTS

CONTINUED

Total Group revenue and headline operating profit

Revenue and headline operating profit for the total Smiths Group including discontinued operations

is calculated as follows:


			Year ended
		Year ended	31 July 2025
		31 July 2026	represented*
	Notes	£m	£m
Revenue
Continuing operations		1,937	1,898
Discontinued operations		1,220	1,438
Total Group		3,157	3,336
Headline operating profit
Continuing operations		399	388
Discontinued operations		209	192
Total Group		608	580

* Results for the year ended 31 July 2025 have been represented to reflect the reclassification of the Smiths Detection

and certain Flex-Tek general industrial businesses as discontinued operations.

Credit metrics

Smiths Group monitors the ratio of net debt to headline EBITDA as part of its management of credit

ratings; see note 26 for details. This ratio is calculated as follows:

Headline earnings before interest, tax, depreciation and amortisation (headline EBITDA)


		Year ended
		31 July 2026	Year ended
		Continuing	31 July 2025
		operations	Total operations*
	Notes	£m	£m
Headline operating profit		399	580
Exclude:
– depreciation of property, plant and equipment		22	43
– depreciation of right of use assets		23	34
– amortisation and impairment of development costs		–	10
– amortisation of software, patents and intellectual property		3	15
Headline EBITDA		447	682

Ratio of net debt to headline EBITDA


		Year ended
		31 July 2026	Year ended
		Continuing	31 July 2025
		operations	Total operations*
	Notes	£m	£m
Headline EBITDA		447	682
Net (cash)/debt (FY2025 includes £21m of net cash from
discontinued operations)	18	(1,747)	441
Ratio of net (cash)/debt to headline EBITDA		(3.9)	0.6

* Results for the comparative period in the credit metrics tables above include discontinued operations.

31. Post balance sheet events

Details of the proposed final dividend announced since the end of the reporting period are in note 25.

32. Audit exemption taken for subsidiaries

The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to

the audit of individual accounts by virtue of Section 479A of that Act for FY2026.


Company name	Company number
EIS Group Limited	61407
Flexibox International Limited	394688
Flex-Tek Group Limited	11545405
SI Properties Limited	160881
Smiths Finance Limited	7888063
Smiths Group Innovation Limited	10953689
Smiths Pensions Limited	2197444

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

167

UNAUDITED GROUP FINANCIAL RECORD 2022–2026

Unaudited Group financial record 2022–2026

			Year ended
		Year ended	31 July 2025	Year ended	Year ended	Year ended
		31 July 2026	represented*	31 July 2024	31 July 2023	31 July 2022
		£m	£m	£m	£m	£m
Income statement metrics – headline*
Continuing operations	Revenue	1,937	1,898	2,778	3,037	2,566
	Headline operating profit	399	388	477	501	417
	Headline profit before tax	363	361	440	466	376
Discontinued operations	Revenue	1,220	1,438	354	–	356
	Headline operating profit	209	192	49	–	66
	Headline profit before tax	210	188	48	–	65
Income statement metrics – statutory**
Revenue		1,937	1,898	2,778	3,037	2,566
Operating profit		289	347	369	403	117
Profit before taxation		245	317	327	360	103
Profit for the year		1,972	292	222	232	1,035
Balance sheet metrics***
Net cash/(debt)		1,747	(462)	(213)	(387)	(150)
Shareholders’ equity		2,582	2,036	2,230	2,384	2,699
Average capital employed		3,014	3,204	3,206	3,196	2,940
Ratios
Headline operating profit: revenue (%) **		20.6	20.5	17.1	16.5	16.5
Headline effective tax rate (%)**		24.4	22.7	25.0	26.0	27.2
Return on capital employed (%)**		23.5	24.5	16.4	15.7	14.2
Return on shareholders’ funds (%)***		15.3	15.6	13.0	11.3	10.0
Cash-flow metrics
Headline operating cash**		384	377	509	433	318
Headline operating cash conversion (%)**		96	97	97	86	76
Free cash-flow***		256	336	298	178	130
Free cash-flow per share (p)***		86.5	101.9	86.4	51.0	35.9
Earnings per share***
Headline earnings per share (p)		135.7	121.2	105.5	97.5	82.5
Dividends and dividend cover***
Pence per share		48.5	46.00	43.75	41.60	39.60
Headline dividend cover		2.8	2.6	2.4	2.3	2.1

*

The headline income statement metrics in the above five-year record have been presented to classify the Smiths Detection and certain Flex-Tek General Industrial businesses as a discontinued operation in FY2025, the Smiths Interconnect

business as a discontinued operation in FY2025 and FY2024 and the Smiths Medical business as a discontinued operation in FY2022.

**

The statutory income statement metrics, income statement ratios and operating cash-flow metrics are presented based on continuing operations for both the current and FY2025 comparative year.

***

Balance sheet metrics, ratios, cash-flow metrics, earnings per share, dividend cover and number of employees are presented based on both continuing and discontinued operations for all years.

168

Smiths Group plc Annual Report FY2026

UNAUDITED US DOLLAR PRIMARY STATEMENTS

Unaudited supplementary consolidated income statement – US dollar translation

Year ended 31 July 2026

Year ended 31 July 2025 - represented

Non-headline

Headline

(note 3)

Total

Headline

(note 3)

Total

$m

CONTINUING OPERATIONS

Revenue

2,598

–

2,598

2,467

–

2,467

Operating costs

(2,063)

(148)

(2,211)

(1,962)

(53)

(2,015)

Operating profit/(loss)

535

(148)

387

505

(53)

452

Interest income

59

–

59

48

–

48

Interest expense

(107)

–

(107)

(84)

5

(79)

Other financing losses

–

(17)

–

(14)

Other finance charges – retirement benefits

–

7

–

5

Finance costs

(48)

(10)

(58)

(36)

(4)

(40)

Profit/(loss) before taxation

487

(158)

329

469

(57)

412

Taxation

(119)

1

(118)

(107)

25

(82)

Profit/(loss) for the year

368

(157)

211

362

(32)

330

DISCONTINUED OPERATIONS

Profit from discontinued operations

205

2,229

2,434

173

(123)

50

PROFIT/(LOSS) FOR THE YEAR

573

2,072

2,645

535

(155)

380

Profit/(loss) for the year attributable to:

Smiths Group shareholders – continuing operations

365

(157)

208

359

(32)

327

Smiths Group shareholders – discontinued operations

205

2,229

2,434

173

(123)

50

Non-controlling interests

3

–

3

–

3

573

2,072

2,645

535

(155)

380

EARNINGS PER SHARE

Basic

843.3c

111.4c

Basic – continuing

66.4c

96.8c

Diluted

839.8c

110.9c

Diluted – continuing

66.1c

96.3c

Assets and liabilities have been translated into US dollars at the exchange rate at the date of that balance sheet and income, expenses and cash-flows are translated at average exchange rates

for the period. This reflects the accounting approach that Smiths Group plc would use if the Group moved to reporting in US dollars without making any changes to its Group structure or

financing arrangements.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

169

UNAUDITED US DOLLAR PRIMARY STATEMENTS

CONTINUED

Unaudited supplementary consolidated statement of comprehensive income – US dollar translation

Year ended

31 July 2026

31 July 2025

$m

Profit for the year

2,645

380

Other comprehensive income (OCI):

OCI which will not be reclassified to the income statement:

Re-measurement of post-retirement benefits assets and obligations

(94)

(4)

Taxation on post-retirement benefits movements

19

–

Fair value movements on financial assets at fair value through OCI

–

10

(75)

6

OCI which will be reclassified and reclassifications:

Fair value gains/(losses) and reclassification adjustments:

– deferred in the year on cash-flow and net investment hedges

4

(1)

– reclassified to income statement on cash-flow and net investment hedges

(1)

3

2

Foreign exchange (FX) movements net of recycling:

Exchange losses on translation of foreign operations

(20)

(45)

Exchange gains recycled to the income statement on disposal of business

(47)

–

(67)

(45)

Total other comprehensive income, net of taxation

(139)

(37)

TOTAL COMPREHENSIVE INCOME

2,506

343

Attributable to:

Smiths Group shareholders

2,507

340

Non-controlling interests

(1)

3

2,506

343

Total comprehensive income attributable to Smiths Group shareholders arising from:

Continuing operations

26

314

Discontinued operations

2,481

26

2,507

340

170

Smiths Group plc Annual Report FY2026

UNAUDITED US DOLLAR PRIMARY STATEMENTS

CONTINUED

Unaudited supplementary consolidated balance sheet – US dollar translation

31 July 2026

31 July 2025

$m

NON-CURRENT ASSETS

Intangible assets

840

1,698

Property, plant and equipment

280

323

Right of use assets

128

131

Financial assets – other investments

8

Retirement benefit assets

3

169

Deferred tax assets

105

130

Trade and other receivables

105

119

Financial derivatives

–

13

1,469

2,591

CURRENT ASSETS

Inventories

382

775

Current tax receivable

12

26

Trade and other receivables

624

974

Cash and cash equivalents

3,981

258

Financial derivatives

28

9

Assets held for sale

18

670

5,045

2,712

TOTAL ASSETS

6,514

5,303

CURRENT LIABILITIES

Financial liabilities – borrowings

(758)

(4)

Financial liabilities – lease liabilities

(32)

(38)

Financial liabilities – financial derivatives

(3)

Provisions for liabilities and charges

(61)

(74)

Trade and other payables

(909)

(898)

Current tax payable

(47)

(87)

Liabilities held for sale

(9)

(140)

(1,819)

(1,244)

NON-CURRENT LIABILITIES

Financial liabilities – borrowings

(723)

(735)

Financial liabilities – lease liabilities

(108)

(104)

Financial liabilities – financial derivatives

(30)

–

Provisions for liabilities and charges

(215)

(262)

Retirement benefit obligations

(67)

(127)

Deferred tax liabilities

(31)

(57)

Trade and other payables

(13)

(50)

(1,187)

(1,335)

TOTAL LIABILITIES

(3,006)

(2,579)

NET ASSETS

3,508

2,724

31 July 2026 31 July 2025
$m $m
SHAREHOLDERS’ EQUITY
Share capital	149	164
Share premium account	492	483
Capital redemption reserve	59	41
Merger reserve	316	311
Retained earnings	2,562	1,935
Hedge reserve	(101)	(242)
TOTAL SHAREHOLDERS’ EQUITY	3,477	2,692
Non-controlling interest equity	31	32
TOTAL EQUITY	3,508	2,724

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

171

UNAUDITED US DOLLAR PRIMARY STATEMENTS

CONTINUED

Unaudited supplementary consolidated statement of changes in equity – US dollar translation

	Share capital				Equity
	and share	Other	Retained	Hedge	shareholders’	Non-controlling	Total
	premium	reserves	earnings	reserve	funds	interest	equity
	$m	$m	$m	$m	$m	$m	$m
At 31 July 2025	647	352	1,935	(242)	2,692	32	2,724
Profit for the year	–	–	2,642	–	2,642	3	2,645
Other comprehensive income:
– re-measurement of retirement benefits after tax	–	–	(75)	–	(75)	–	(75)
– FX movements net of recycling	11	6	(166)	137	(12)	(4)	(16)
– fair value gains and related tax	–	–	–	4	4	–	4
Total comprehensive income for the year	11	6	2,401	141	2,559	(1)	2,558
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust	–	–	(58)	–	(58)	–	(58)
Proceeds received on exercise of employee share options	–	–	3	–	3	–	3
Share buybacks	(17)	17	(1,554)	–	(1,554)	–	(1,554)
Dividends:
– equity shareholders	–	–	(200)	–	(200)	–	(200)
Share-based payment	–	–	35	–	35	–	35
At 31 July 2026	641	375	2,562	(101)	3,477	31	3,508
	Share capital				Equity
	and share	Other	Retained	Hedge	shareholders’	Non-controlling	Total
	premium	reserves	earnings	reserve	funds	interest	equity
	$m	$m	$m	$m	$m	$m	$m
At 31 July 2024	636	334	2,130	(236)	2,864	28	2,892
Profit for the year	–	–	377	–	377	3	380
Other comprehensive income:
– re-measurement of retirement benefits after tax	–	–	(4)	–	(4)	–	(4)
– FX movements net of recycling	19	10	14	(8)	35	1	36
– fair value gains and related tax	–	–	10	2	12	–	12
Total comprehensive income for the year	19	10	397	(6)	420	4	424
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust	–	–	(30)	–	(30)	–	(30)
Proceeds received on exercise of employee share options	(8)	8	1	–	1	–	1
Share buybacks	–	–	(394)	–	(394)	–	(394)
Dividends:
– equity shareholders	–	–	(198)	–	(198)	–	(198)
Share-based payment	–	–	29	–	29	–	29
At 31 July 2025	647	352	1,935	(242)	2,692	32	2,724

172

Smiths Group plc Annual Report FY2026

UNAUDITED US DOLLAR PRIMARY STATEMENTS

CONTINUED

Unaudited supplementary consolidated cash-flow statement – US dollar translation

Year ended

31 July 2026

31 July 2025

$m

Net cash inflow from operating activities

323

593

CASH-FLOWS FROM INVESTING ACTIVITIES

Expenditure on capitalised development

–

(5)

Expenditure on other intangible assets

(4)

(5)

Purchases of property, plant and equipment

(86)

(94)

Disposals of property, plant and equipment

11

–

(Investment in)/Income from financial assets

(1)

69

Acquisition of businesses

(213)

(157)

Acquisition of businesses related to discontinued operations

(8)

–

Acquisition of business - deferred consideration

(15)

–

Proceeds on disposal of subsidiaries, net of cash disposed

4,352

(16)

Net cash-flow used in investing activities

4,036

(208)

CASH-FLOWS FROM FINANCING ACTIVITIES

Share buybacks

(1,125)

(394)

Purchase of shares by Employee Benefit Trust

(58)

(30)

Proceeds received on exercise of employee share options

3

1

Settlement of cash-settled options

–

(1)

Dividends paid to equity shareholders

(200)

(198)

Lease payments

(55)

(53)

Reduction and repayment of borrowings

758

–

Cash inflow from matured derivative financial instruments

(5)

3

Net cash-flow used in financing activities

(682)

(672)

Net increase/(decrease) in cash and cash equivalents

3,676

(287)

Cash and cash equivalents at beginning of year

258

589

Reclassified to assets held for sale

42

(41)

Exchange differences

5

(3)

Cash and cash equivalents at end of year

3,981

258

Cash and cash equivalents at end of year comprise:

– cash at bank and in hand

135

– short-term deposits

3,846

123

3,981

258

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

173

SMITHS GROUP PLC COMPANY ACCOUNTS

Company balance sheet

Notes

31 July 2026

£m

31 July 2025

£m

NON-CURRENT ASSETS

Property, plant and equipment

2

3

Investments

3

2,261

2,255

Loans due from subsidiaries

3

–

1,410

Financial derivatives

9

–

10

Retirement benefit assets

10

–

128

2,263

3,806

CURRENT ASSETS

Trade and other receivables

5

57

Cash and cash equivalents

7

2,843

85

Financial derivatives

9

21

8

2,921

150

TOTAL ASSETS

5,184

3,956

CURRENT LIABILITIES

Borrowings

7

(556)

–

Trade and other payables

6

(403)

(105)

Financial derivatives

9

(5)

(8)

(964)

(113)

NON-CURRENT LIABILITIES

Borrowings

7

(537)

(563)

Loans due to subsidiaries

(36)

(2)

Provisions for liabilities and charges

8

(1)

Retirement benefit liabilities

10

(35)

Financial derivatives

9

(22)

–

(631)

(601)

TOTAL LIABILITIES

(1,595)

(714)

NET ASSETS

3,589

3,242

Notes

31 July 2026

£m

31 July 2025

£m

SHAREHOLDERS’ EQUITY

Called up share capital

11

111

124

Share premium account

11

365

Capital redemption reserve

11

44

31

Other reserves

11

183

181

Profit and loss account

11

2,886

2,541

TOTAL EQUITY

3,589

3,242

The Company’s profit for the period was £1,729m (FY2025: £1,528m profit).

The accounts on pages 173 to 180 were approved by the Board of Directors on 21 September 2026

and were signed on its behalf by:

Roland Carter

Julian Fagge

Chief Executive Officer

Chief Financial Officer

Smiths Group plc – registered number 137013

174

Smiths Group plc Annual Report FY2026

SMITHS GROUP PLC COMPANY ACCOUNTS

CONTINUED

Company statement of changes in equity

Share

capital

£m

Share

premium

£m

Capital

redemption

reserve

£m

Other

reserves

£m

Retained

profit

£m

Shareholders’

equity

£m

At 31 July 2025

124

365

31

181

2,541

3,242

Profit for the year

–

1,729

Other comprehensive income:

– re-measurement of retirement benefits

–

(72)

– taxation recognised on retirement benefits

–

13

– fair value gains

–

2

–

2

Total comprehensive income for the year

–

2

1,670

1,672

Transactions with owners:

Purchase of shares by Employee Benefit Trust

–

(43)

Proceeds received on exercise of employee share options

–

2

Shares purchased under a buyback programme

(13)

–

13

–

(1,159)

Dividends paid to equity shareholders

–

(149)

Share-based payment

–

24

Total transactions with owners recognised in equity

(13)

–

13

–

(1,325)

At 31 July 2026

111

365

44

183

2,886

3,589

Share

capital

£m

Share

premium

£m

Capital

redemption

reserve

£m

Other

reserves

£m

Retained

profit

£m

Shareholders’

equity

£m

At 31 July 2024

130

365

25

181

1,471

2,172

Profit for the year

–

1,528

Other comprehensive income:

– re-measurement of retirement benefits

–

(3)

– taxation recognised on retirement benefits

–

1

Total comprehensive income for the year

–

1,526

Transactions with owners:

Purchase of shares by Employee Benefit Trust

–

(23)

Proceeds received on exercise of employee share options

–

1

Shares purchased under a buyback programme

(6)

–

6

–

(303)

Dividends paid to equity shareholders

–

(152)

Share-based payment

–

21

Total transactions with owners recognised in equity

(6)

–

6

–

(456)

At 31 July 2025

124

365

31

181

2,541

3,242

Overview

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Governance

Financial statements

Smiths Group plc Annual Report FY2026

175

SMITHS GROUP PLC COMPANY ACCOUNTS

CONTINUED

Company accounting policies

Basis of preparation

These financial statements were prepared in accordance with Financial Reporting Standard 101

Reduced Disclosure Framework (FRS 101). In preparing these financial statements, the Company

applies the recognition, measurement and disclosure requirements of UK-adopted international

accounting standards (Adopted IFRSs), but makes amendments where necessary in order to

comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure

exemptions has been taken.

These accounts have been prepared on a going concern basis and under the historical cost

convention modified to include revaluation of certain financial instruments, share options and

pension assets and liabilities held at fair value.

As permitted by Section 408(3) of the Companies Act 2006, the Company’s income statement and

statement of comprehensive income have not been presented. As permitted by Section 408(2),

information about the Company’s employee numbers and costs is not presented.

Going concern

The Directors are satisfied that the Group, (of which the Company is the holding company) has

adequate resources to continue to operate for a period not less than 12 months from the date of

approval of the financial statements and that there are no material uncertainties around their

assessment. Accordingly, the Directors continue to adopt the going concern basis of accounting.

Details of the going concern assessment for the Group are provided in the accounting policies note

of the consolidated financial statements.

Exemptions from the requirements of IFRS applied in accordance with FRS 101

The following exemptions from the requirements of IFRS have been applied in the preparation of

these financial statements, in accordance with FRS 101:

–

Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and

weighted-average exercise prices of share options, and how the fair value of goods or services

received was determined);

–

IFRS 7, ‘Financial Instruments: Disclosures’;

–

Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques

and inputs used for fair value measurement of assets and liabilities);

–

Paragraph 38 of IAS 1, ‘Presentation of financial statements’ comparative information

requirements in respect of:

–

paragraph 79(a)(iv) of IAS 1; and

–

paragraph 73(e) of IAS 16 ‘Property, plant and equipment’;

–

The following paragraphs of IAS 1, ‘Presentation of financial statements’:

–

10(d) (statement of cash-flows);

–

16 (statement of compliance with all IFRS);

–

38A (requirement for minimum of two primary statements, including cash flow statements);

–

38B-D (additional comparative information);

–

111 (cash flow statement information); and

–

134-136 (capital management disclosures).

–

IAS 7, ‘Statement of cash-flows’;

–

Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’

(requirement for the disclosure of information when an entity has not applied a new IFRS that

has been issued but is not yet effective);

–

Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation);

–

The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions

entered into between two or more members of a group; and

–

The requirements of paragraphs 52 and 58 of IFRS 16 Leases.

Significant judgements, key assumptions and estimates

The preparation of the accounts in conformity with generally accepted accounting principles

requires management to make estimates and judgements that affect the reported amounts of

assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts

and the reported amounts of revenues and expenses during the reporting period. Actual results

may differ from these estimates.

The key sources of estimation uncertainty together with the significant judgements and

assumptions used in these Parent Company financial statements are set out below.

Significant judgements made in applying accounting policies

Taxation

The Company has recognised deferred tax assets of £nil (FY2025: £23m) relating to revenue losses

brought forward. The decision to recognise deferred tax assets requires judgement in determining

whether the Company will be able to utilise historical tax losses in future periods. Management has

concluded that the recognition criteria under IAS 12 are not met.

Other judgements made in applying accounting policies

Retirement benefits

At 31 July 2026 the Company has recognised £nil of retirement benefit assets (FY2025: £128m),

which arises from the rights of the employers to recover the surplus at the end of the life of

the scheme.

The recognition of a retirement benefit surplus requires judgement to determine whether an

unconditional right of refund exists based on the provision of the relevant Trust deed and rules.

For FY2025, having taken legal advice, it had been determined that an unconditional right of refund

did exist and therefore the surplus was recoverable by the Company and could be recognised at

that time.

Following the completion of transactions to secure remaining uninsured pension liabilities and

de-recognise liabilities where the legal obligation for payment of benefits has been transferred to

insurers, the Company no longer has an unconditional right to a refund, and so has placed an

economic benefit value of zero on the surplus for FY2026.

Further details are disclosed in note 8 to the consolidated financial statements.

176

Smiths Group plc Annual Report FY2026

SMITHS GROUP PLC COMPANY ACCOUNTS

CONTINUED

Significant accounting policies

Foreign currencies

Foreign currency transactions are recorded at the exchange rate ruling on the date of transaction.

Foreign exchange gains and losses resulting from the settlement of such transactions, and from

the retranslation at year-end exchange rates of monetary assets and liabilities denominated in

foreign currencies, are recognised in the profit and loss account.

Investments in and loans to Group companies

The Company’s investments in shares in Group companies are stated at cost less provision for

impairment. Any impairment is charged to the profit and loss account as it arises.

The recoverability of intercompany loans is assessed applying the methodology of IFRS 9 by looking

at the credit quality of the subsidiary and any support available to the entity. These calculations

require the use of estimates including projected future cash-flows and other future events. The

application of the expected credit loss model has not had a material impact on the Company’s loan

receivables provisioning position.

Financial instruments

The policies disclosed in the Group accounting policies on pages 112 to 119 for recognition,

measurement and presentation of financial instruments are applied in the Company accounts.

Taxation

Deferred tax is provided 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 relief.

Deferred tax is provided on temporary differences arising on investments in subsidiaries, except

where the timing of the reversal of the temporary difference is controlled by the Company and it is

probable that the temporary difference will not reverse in the foreseeable future.

Provisions

Provisions for disposal indemnities, restructuring costs, property dilapidations and legal claims are

recognised when: the Company has a legal or constructive obligation as a result of a past event; it is

probable that an outflow of resources will be required to settle the obligation; and the amount has

been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are discounted where the time value of money is material.

Retirement benefits

The Company has both defined benefit and defined contribution plans. The policies disclosed in the

Group accounting policies on pages 112 to 119 for recognition, measurement and presentation of

retirement benefits are applied in the Company accounts. Note 8 to the consolidated accounts

explains the valuation basis for the Company’s retirement benefit schemes assets and liabilities.

Share-based payment

The Company operates a number of employee benefit equity-settled and cash-settled share-based

compensation plans.

The fair value of the share awards and share options granted is recognised over the vesting period

to reflect the value of the employee services received. The charge relating to grants to employees of

the Company is recognised as an expense in the profit and loss account and the charge for grants to

employees of other Group companies is recognised as an investment in the relevant subsidiary.

The fair value of options granted, excluding the impact of any non-market vesting conditions, is

calculated using established option pricing models, principally binomial models. The probability of

meeting non-market vesting conditions, which include profitability targets, is used to estimate the

number of share awards that are likely to vest.

For cash-settled share-based payment schemes, a liability is recognised based on the fair value of

the payment earned by the balance sheet date. For equity-settled share-based payment schemes,

the corresponding credit is recognised directly in reserves.

Dividends

Dividends are recognised as a liability in the period in which they are authorised. The interim

dividend is recognised when it is paid and the final dividend is recognised when it has been approved

by shareholders at the Annual General Meeting.

Intra-group financial guarantee contracts

Where the Company enters into financial guarantee contracts to guarantee the indebtedness of

other companies within its group, the Company considers these to be in the scope of IFRS 9 and

accounts for them as such. Financial guarantee contracts issued are initially measured at fair value.

Subsequently, they are measured at the higher of the loss allowance determined in accordance with

IFRS 9 and the amount initially recognised less, when appropriate, the cumulative amount of income

recognised in accordance with the principles of IFRS 15.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

177

SMITHS GROUP PLC COMPANY ACCOUNTS

CONTINUED

Notes to the Company accounts

1. Audit fee and Directors’ emoluments

The audit fee paid to KPMG LLP for the Parent Company was £0.1m (FY2025: £0.1m).

Directors’ emoluments in the year amounted to £7m (FY2025: £11m). Further information for

the Executive Directors is available in the single figure remuneration table on page 81. Further

information for the Non-executive Directors is available in the single figure remuneration table

on page 88.

2. Property, plant and equipment

Fixtures and fittings

£m

Cost or valuation

At 31 July 2024

3

Additions

–

At 31 July 2025

3

Additions

–

At 31 July 2026

3

Depreciation

At 31 July 2024

–

Charge for the year

–

At 31 July 2025

–

Charge for the year

(1)

At 31 July 2026

(1)

Net book value at 31 July 2026

2

Net book value at 31 July 2025

3

Net book value at 31 July 2024

3

3. Investments and loans due from subsidiaries

Shares in

subsidiary

undertakings

£m

Loans

due from

subsidiaries

£m

Total

£m

Cost or valuation

At 31 July 2024

2,444

1

2,445

Foreign exchange rate movements

–

(9)

Contribution through share options

13

–

13

Increase in advances due from subsidiaries

–

1,419

Disposals

(69)

–

(69)

At 31 July 2025

2,388

1,411

3,799

Foreign exchange rate movements

–

Contribution through share options

14

–

14

Decrease in advances due from subsidiaries

–

(1,410)

Disposals

–

At 31 July 2026

2,402

1

2,403

Provision for impairment

At 31 July 2024

5

1

6

Impairment charge for the year

128

–

128

At 31 July 2025

133

1

134

Impairment charge for the year

8

–

8

At 31 July 2026

141

1

142

Net book value at 31 July 2026

2,261

–

2,261

Net book value at 31 July 2025

2,255

1,410

3,665

Net book value at 31 July 2024

2,439

–

2,439

Loans due to subsidiaries are offset against loans due from subsidiaries only to the extent that there

is a legal right of set-off. At 31 July 2026 £2,135m of loans receivable are offset against loans payable

(FY2025: £1,242m). The Company has large offsetting loan balances because it uses loans to reduce

its foreign currency exposures and separately monitor net cash generated from trading activities.

Loans due from subsidiaries are receivable at maturity, £nil (FY2025: £486m) are receivable

between one and two years and £nil (FY2025: £924m) are receivable between two and five years.

The Company’s subsidiaries are largely held according to business lines by the following holding

companies, which are incorporated in England:

Smiths Group International Holdings Limited

John Crane Group Limited

Flex-Tek Group Limited

178

Smiths Group plc Annual Report FY2026

SMITHS GROUP PLC COMPANY ACCOUNTS

CONTINUED

The principal subsidiaries and their countries of incorporation are:

England

John Crane UK Limited

Smiths Group International Holdings Limited

Other

John Crane Middle East FZE (UAE)

John Crane Technology (Tianjin) Co Limited (China)

John Crane Saudi Arabia Ltd (Saudi Arabia)

John Crane Canada Inc (Canada)

United States

John Crane, Inc.

Titeflex Corporation

Tutco, LLC

Royal Metal Products, LLC

Kreisler Manufacturing Corp

Smiths Tubular Systems – Laconia Inc.

Of the companies above, Smiths Group International Holdings Limited is 100% owned directly by

the Company. The others are 100% owned through intermediate holding companies. Shareholdings

are of ordinary shares or common stock. All of the above subsidiaries operate in their country

of incorporation.

See pages 181 to 184 for a complete list of subsidiary undertakings.

4. Deferred tax assets and liabilities

The Company has recognised the following deferred tax assets and liabilities:

Share-

based

payment

£m

Retirement

benefit

obligations

£m

Losses

carried

forward

£m

Other

£m

Total

£m

At 31 July 2024

–

(24)

24

–

(Charge)/credit to income statement

–

(1)

–

(1)

Charge to equity

–

1

–

1

At 31 July 2025

–

(23)

23

–

(Charge)/credit to income statement

–

10

(23)

–

(13)

Charge to equity

–

13

–

13

At 31 July 2026

–

The Company is part of a UK tax group including all its UK-based subsidiaries. The Company

has recognised deferred tax assets of £nil (FY2025: £23m) relating to revenue losses carried

forward. The recognition of these assets is dependent on the ability to recover them against the

unwind of other tax positions and forecast of the UK tax group. The treatment of these assets is

reviewed regularly.

At 31 July 2026 the Company has unrecognised deferred tax assets of £102m (FY2025: £75m)

relating to losses £98m (FY2025: £70m), share-based payments £2m (FY2025: £2m) and other

£2m (FY2025: £3m).

Deferred tax has been calculated at a rate of 25% in both the current and prior years.

5. Trade and other receivables

31 July 2026

£m

31 July 2025

£m

Amounts owed by subsidiaries

52

47

Other receivables

5

10

57

Amounts owed by subsidiaries are unsecured and are either repayable on demand or at maturity on

or before 31 July 2027.

6. Trade and other payables

31 July 2026

£m

31 July 2025

£m

Amounts owed to subsidiaries

32

67

Other creditors

353

8

Accruals

18

30

403

105

Other creditors includes £278m (FY2025: £nil) of accruals in respect of a non-cancellable share buy

back commitment and £41m (FY2025: £nil) of accruals for shares purchased before the year end but

have not yet been settled or cancelled, further details can be found in note 11 of the accounts.

7. Borrowings and net cash/(debt)

31 July 2026

£m

31 July 2025

£m

Cash at bank

17

9

Short-term deposits

2,826

76

Cash and cash equivalents

2,843

85

Term loans falling due within one year

(556)

–

Term loans falling due after one year

(537)

(563)

Borrowings

(1,093)

(563)

Net cash/(debt)

1,750

(478)

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

179

SMITHS GROUP PLC COMPANY ACCOUNTS

CONTINUED

Term loans

The currency and coupons for the term loans are disclosed in note 18 of the Group accounts.

31 July 2026

£m

31 July 2025

£m

Less than one year

556

–

Between one and two years

–

563

Greater than five years

537

–

Smiths Group plc term loans

1,093

563

See the liquidity risk disclosures in note 19 in the Group accounts for information on the cash

and borrowing facilities available to the Group. The Smiths Group has revolving credit facilities of

US$800m maturing on 5 May 2030.

8. Provisions for liabilities and charges

At

31 July 2025

£m

Charged

against profit

£m

Utilisation

£m

At

31 July 2026

£m

Disposals

1

–

1

The disposal provision related to warranties and other obligations in respect of a past disposal.

9. Derivatives

The tables below set out the nominal amount and fair value of derivative contracts held by

the Company:

At 31 July 2026

Contract or underlying

nominal amount

£m

Fair value

Assets

£m

Liabilities

£m

Net

£m

Foreign exchange contracts (not hedge

accounted)

591

4

(5)

(1)

Cross-currency swaps (fair value and net

investment hedges)

808

17

(22)

(5)

Total financial derivatives

1,399

21

(27)

(6)

Balance sheet entries

Comprising:

Non-current

–

(22)

Current

21

(5)

16

Total financial derivatives

21

(27)

(6)

At 31 July 2025

Contract or underlying

nominal amount

£m

Fair value

Assets

£m

Liabilities

£m

Net

£m

Foreign exchange contracts (not hedge accounted)

824

8

(8)

–

Cross-currency swaps (fair value and net

investment hedges)

240

10

–

10

Total financial derivatives

1,064

18

(8)

10

Balance sheet entries

Comprising:

Non-current

10

–

10

Current

8

(8)

–

Total financial derivatives

18

(8)

10

Derivatives, including forward exchange contracts, currency swaps, interest rate instruments and

embedded derivatives are Level 2 fair value instruments and are valued at the net present value of

the future cash-flows calculated using market data at the balance sheet date (principally exchange

rates and yield curves).

The debit to the income statement arising from change in fair value in the year was £25m

(FY2025: £23m credit).

10. Post-retirement benefits

The Company is the principal employer for the two major defined benefit plans in the UK. The

Company is accounting for all the UK defined benefit schemes (funded and unfunded) and virtually all

of the post-retirement healthcare schemes. The retirement benefit assets and liabilities comprise:

31 July 2026

£m

31 July 2025

£m

Market value of scheme assets

1,213

2,136

Present value of funded scheme liabilities

(1,151)

(1,997)

Surplus restriction

(62)

(11)

Surplus

–

128

Unfunded pension plans

(32)

(33)

Post-retirement healthcare

(3)

(2)

Present value of unfunded obligations

(35)

Net pension (liability)/asset

(35)

93

Comprising:

Retirement benefit assets

–

128

Retirement benefit liabilities

(35)

Net pension (liability)/asset

(35)

93

See the disclosures for UK schemes in note 8 to the consolidated accounts for the circumstances of

the major schemes, risk management, principal assumptions, assets and liabilities and the funding

position of the two major schemes.

180

Smiths Group plc Annual Report FY2026

SMITHS GROUP PLC COMPANY ACCOUNTS

CONTINUED

11. Share capital and reserves

Share capital

Number of shares

Issued

capital

£m

Consideration

£m

Ordinary shares of 37.5p each

Total share capital at 31 July 2024

345,097,794

130

Shares purchased under a buyback programme

(15,413,491)

(6)

(303)

Total share capital at 31 July 2025

329,684,303

124

Shares purchased under a buyback programme

(33,877,205)

(13)

(839)

Total share capital at 31 July 2026

295,807,098

111

At 31 July 2026, all of the issued share capital was in free issue. All issued shares are fully paid.

See note 9 to the Group consolidated financial statements for information about share schemes,

including total shares under options and options exercisable at the balance sheet date.

Smiths Employee Benefit Trust

The retained earnings include the purchase of Smiths Group plc shares by Smiths Employee

Benefit Trust (EBT). The EBT holds shares pending employees becoming entitled to them under

the Company’s share schemes and plans. The consideration paid was £43m (2025: £23m) and

£2m (2025: £1m) was received as a result of employees exercising share options under the SAYE

scheme. At 31 July 2026 the Trust held 1,493,880 (2025: 1,662,267) ordinary shares.

Distributable profits

Smiths Group plc, the Parent Company of the Group, holds investments in subsidiaries and operates

as a financing entity for the Group. Its profits are derived from dividend receipts, royalties, corporate

recharges, and loan interests from its subsidiary companies. Prior to the declaration of interim and

final dividends to shareholders, the Board conducts a review of the level of distributable profits of

the Parent Company. This ensures the profits provide sufficient coverage for dividend payments;

see note 26 in the Group consolidated financial statements for a discussion of capital management

and the factors which the Board considers when proposing dividends.

In accordance with the UK Companies Act 2006 Section 831(1), a public company may only make

a distribution if, after fulfilling this distribution, the amount of its net assets is not less than the

aggregate of its called-up share capital and non-distributable reserves as it appears in the relevant

accounts. The Company establishes what is realised and unrealised in accordance with the

guidance provided by ICAEW TECH 02/17BL and the requirements of UK law.

Share buybacks

At 31 July 2026 the Group had provided its brokers with a non-cancellable instruction to purchase

shares on the Group’s behalf over the year end close period. It has been determined that this

instruction has created a £278m financial liability for the present value of the redemption amount,

this has been accrued for at the year end.

During the current year, the Company purchased and cancelled 33,877,205 shares for a total

consideration of £839m. At 31 July 2026 1,561,624 shares were yet to settle and be cancelled, this

has created a £41m financial liability that has been accrued for at the year end.

Profits available for distribution at 31 July 2026 and 31 July 2025 were comprised as follows:

2026

£m

2025

£m

Net assets

3,589

3,242

Less:

Issued share capital

(111)

(124)

Share premium

(365)

Capital redemption reserve

(44)

(31)

Other non-distributable reserves

(1,080)

(1,074)

Distributable profits

1,989

1,648

Other reserves

Other reserves of £181m arose from the cancellation of the share premium arising from an

equity-funded acquisition in the year ended 30 July 1988.

Other reserves also includes £2m (FY2025: nil) of effective cash-flow hedges deferred in equity

hedging market volatility on the 2033 Eurobond.

Differential between consolidated and Parent Company net assets

The Group’s consolidated balance sheet shows net assets that are £984m lower (FY2025: £1,182m

lower) than the net assets shown on the Parent Company’s balance sheet. This deficit principally

arose in 2007 when the Group returned £2.1bn of capital to shareholders, creating a net asset deficit

of £1.9bn.

Earnings retained within the Group have subsequently reduced this deficit.

12. Contingent liabilities

The Company has arranged letter of credit facilities to support the Group’s pension plans.

The current amount outstanding under letters of credit is £44m (FY2025: £44m).

The Company has guaranteed the US$800m revolving credit facility available to a subsidiary.

13. Post balance sheet event

Details of the proposed final dividend announced since the end of the reporting period are given

in note 25 to the Group consolidated financial statements.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

181

SUBSIDIARY UNDERTAKINGS

Subsidiary undertakings

In accordance with Section 409 of the Companies Act 2006, a full list of Smiths Group plc’s related undertakings, the address and effective percentage owned by the Group, as at 31 July 2026, are disclosed

below. The percentage held is 100% unless another holding is stated. Related undertakings include subsidiaries, associated undertakings, joint ventures and associates.

Wholly owned subsidiaries (direct ownership)

Name

Security

Address

CVE TRUSTEE LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

EIS GROUP LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

FLIGHTSPARES LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

ROOF UNITS (GROUP) LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

S.I. PENSION TRUSTEES LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SI PROPERTIES LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS AEROSPACE COMPONENTS TYSELEY LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS DETECTION LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS GROUP INTERNATIONAL HOLDINGS LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS INDUSTRIES LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS NOMINEES LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS PENSIONS LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

TI CORPORATE SERVICES LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

TI GROUP LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

TIGRUP NO. 7 LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

XDG LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

TI PENSION TRUSTEE LIMITED

Guarantee

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

Wholly owned subsidiaries (indirect ownership)

Name

Security

Address

AIR LOG LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

AMNITEC B.V.

Ordinary

Abraham van Stolkweg 118, Rotterdam, 3041 JA, Netherlands

AMNITEC LIMITED

Ordinary

Abercanaid, Merthyr Tydfil, Mid Glamorgan, CF48 1UX

CHANGSHU FLEX-TEK THERMAL FLUID SYSTEMS MANUFACTURER CO. LTD

Ordinary

No. 7, Factory Building, Maqiao Industrial Square, Changshu Economic Development Zone, Changshu,

Jiangsu, 215536, China

DRC HEAT TRANSFER, LLC

Interest

208 S. LaSalle Street, Suite 814, Chicago, IL, 60604, United States

FLEXIBLE DUCTING MALAYSIA SDN BHD

Ordinary

Suite 13.03, 13th Floor, Menara Tan & Tan, 207 Jalan Tun Razak, 50400, Kuala Lumpur, Malaysia

FLEXIBLE TECHNOLOGIES (CANADA) LTD

Ordinary

4610, Eastgate Parkway, Unit 3, Mississauga, ON, L4W 3W6, Canada

FLEXIBLE TECHNOLOGIES, LLC

Interest

155 Federal Street, Suite 700, Boston, MA, 02110, United States

FLEXIBOX INTERNATIONAL LIMITED

Ordinary

Buckingham House, 361-366 Buckingham Avenue, Slough, Berkshire, SL1 4LU, England

FLEXIBOX PTY LIMITED

Ordinary

549-551, Somerville Rd, Sunshine, Victoria, 3020, Australia

FLEX-TEK GROUP (US) LLC

Interest

500, Gould Drive, Cookeville, TN 38506, United States

FLEX-TEK GROUP LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

FRANCIS SHAW AND COMPANY (MANCHESTER) LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

182

Smiths Group plc Annual Report FY2026

SUBSIDIARY UNDERTAKINGS

CONTINUED

Wholly owned subsidiaries (indirect ownership)

continued

Name

Security

Address

FRANCIS SHAW LTD

Ordinary, Preference,

Deferred

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

FULTON BELLOWS LLC

Interest

2801 Red Dog Lane, Knoxville, TN, TN 37914, United States

HABIA TEKNOFLUOR AB

Ordinary

Habia Teknofluor AB, Knivsta, 74180, Sweden

HERKULES HOLDING GMBH

Ordinary

Neckarweg 3, Vellmar, 34246, Germany

INDUFIL BV

Ordinary

Rijnpoort, Groningensingel 1, 6835 EA Arnhem, Netherlands, Netherlands, 6835

INDUSTRIAS JOHN CRANE MEXICO SA DE CV

Ordinary

679, Poniente 152, Vallejo Delegacion Azcapotzalco, Mexico City, Mexico, 2300

JOHN CRANE (ANGOLA) PRESTACAO DE SERVICES LTD

Ordinary

Rue Kwamme Nkrumah, Torres Impor-Africa, 3 Andar, APT A, Luanda, Angola

JOHN CRANE (IRELAND) LIMITED

Ordinary

T53/54, Shannon Industrial Estate, Shannon, Co. Clare, Ireland

JOHN CRANE (SWITZERLAND) AG

Ordinary

Hohenrainstrasse 10, 4133 Pratteln, Switzerland

JOHN CRANE (THAILAND) LIMITED

Ordinary

No.450 Sukhumvit Road, Huai Pong Sub-District, Mueang Rayong District, Rayong Province, Thailand

JOHN CRANE A.S.

Ordinary

Jana Sigmunda 78, Lutin, 783 49, Czech Republic

JOHN CRANE ARGENTINA SA

Ordinary

AV. Leandro N. Alem 1110, 13 Floor, Baker Mackenzie Office, Buenos Aires, Argentina

JOHN CRANE ASSET MANAGEMENT SOLUTIONS LIMITED

Ordinary

Grampian House, Mugiemoss Road, Bucksburn, Aberdeen, AB21 9NP, Scotland

JOHN CRANE AUSTRALIA PTY LIMITED

Ordinary

549-551, Somerville Rd, Sunshine, Victoria, 3020, Australia

JOHN CRANE BAKU LLC

Interest

32, Dostluq Street, Salyan Highway PO Box AZ1023, Baku, Azerbaijan

JOHN CRANE BELGIUM NV

Ordinary

Glasstraat 37, Antwerpen, 2170, Belgium

JOHN CRANE CANADA INC

Ordinary

423, Green North Road, Stoney Creek, Ontario, L8E 3A1, Canada

JOHN CRANE CARIBE LTD

Ordinary

654 Plaza, Suite #933, 654 Munoz Rivera Ave, San Juan, Puerto Rico, 00918

JOHN CRANE CHILE SA

Ordinary

Av. Presidente Eduardo Frei Montalva, Centro Empresarial El Cortijo, Conchali, Santiago, 6001-44, Chile

JOHN CRANE CHINA CO LIMITED

Ordinary

Room 1668, No. 14F Floor 3 Datong Building, Huanghe Avenue, Nankai District, Tianjin, China

JOHN CRANE COLOMBIA SA

Ordinary

Calle 46A No 82-54 Int 14, Parque Empressarial San Cayetano, Bogota, Colombia

JOHN CRANE DOMINICANA SA

Ordinary

Calle El Recodo, #2 Bella Vista, Santo Domingo, Dominican Republic

JOHN CRANE EGYPT LLC

Interest

139, Mogamaa El Masanea Street, El Amireya, Cairo, Egypt

JOHN CRANE EGYPT SEALING SYSTEMS LLC

Interest

139, Mogamaa El Masanea Street, El Amireya, Cairo, Egypt

JOHN CRANE FILTRATION TECHNOLOGIES GMBH

Ordinary

Neckarweg 3, Vellmar, 34246, Germany

JOHN CRANE FRANCE SAS

Ordinary

114, Rue Jules Ferry, B.P.35, Deville-Les-Rouen, 76250, France

JOHN CRANE GMBH

Ordinary

Werner - Von - Siemens - STR.6, Fulda, 36041, Germany

JOHN CRANE GROUP LIMITED

Ordinary

Buckingham House, 361-366 Buckingham Avenue, Slough, Berkshire, SL1 4LU, England

JOHN CRANE HELLAS - ENGINEERED SEALING SYSTEMS MONOPROSOPI EPE

Ordinary

3a Fragkokklisias & Granikou Street, Maroussi, Attica, 151 25, Greece

JOHN CRANE HOLLAND BV

Ordinary

Bergen 9-17, Barendrecht, Zuid, 2993 LR, Netherlands

JOHN CRANE HUNGARY KFT

Ordinary

2045 Törökbálint, Tópark utca 9, Hungary

JOHN CRANE IBERICA SA

Ordinary

Cemento 1, Torrejon de Ardoz, Madrid, Spain

JOHN CRANE INC

Ordinary, Preference

Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States

JOHN CRANE INTERNATIONAL HOLDINGS INC.

Ordinary

Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States

JOHN CRANE ITALIA SPA

Ordinary

Via Giotto 3, Muggio, 20835, Italy

JOHN CRANE KAZAKHSTAN LLP

Interest

Building No.46, Street No. 1, Atyrau-2 Microdistrict, 04:066:004:543, Kazakhstan

JOHN CRANE KOREA CO LTD

Ordinary

Migeundong, WestgateTower 15F, 70 Chungjeong-ro, SEODAEMUN-GU, SEOUL, Korea (the Republic of)

JOHN CRANE MALAYSIA SDN. BHD.

Ordinary

No. 17, Jalan SIP 2, Suria Industrial Park, Sepang, Selangor, 43900, Malaysia

JOHN CRANE MIDDLE EAST FZE

Ordinary

S20113, Jebel Ali Free Zone, Dubai, 61040, United Arab Emirates

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

183

SUBSIDIARY UNDERTAKINGS

CONTINUED

Wholly owned subsidiaries (indirect ownership)

continued

Name

Security

Address

JOHN CRANE PERU SAC

Ordinary

Av. Guillermo Dansey 2124, Urbanizacion Industrial Conde, Lima, Peru

JOHN CRANE POLAND SP Z O.O.

Ordinary

1327, ul. Bielska, Poland, 43-374 Buczkowice

JOHN CRANE SAFEMATIC OY

Ordinary

PO BOX 10, Punasillantie 15, Muurame, 40950, Finland

JOHN CRANE SAUDI ARABIA LTD

Ordinary

129, Dammam Industrial City, Dammam, Saudi Arabia, 3243

JOHN CRANE SEALING SYSTEMS INDIA PRIVATE LIMITED

Ordinary

No. 11, 1ST Phase Peenya, Industrial Area, Bangalore, 560058, India

JOHN CRANE SINGAPORE PTE LIMITED

Ordinary

15 Tuas View Place, 637432, Singapore

JOHN CRANE SLOVAKIA SRO

Ordinary

Laurinská 18

- mest, mestská časť Staré Mesto, Bratislava, 811 01, Slovakia

JOHN CRANE SOCIEDAD DE RESPONSIBILIDAD LIMITADA DE CAPITAL VARIABLE

Interest

Carretera Ciudad Victoria Matamoros, Km. 173+600, Colonia San Fernando Centro, Tamaulipas, San

Fernando, CP 87600, Mexico

JOHN CRANE SVERIGE AB

Ordinary

Faltspatsgatan 4, SE-421 30 Vastra Frolunda, Sweden

JOHN CRANE (TAIWAN) CO., LTD.

Ordinary

324-4, Fengren Road, Renwu District, Kaohsiung City 81465, Taiwan

JOHN CRANE TECHNOLOGY (TIANJIN) CO LIMITED

Ordinary

No.9, No. 1, Haitai Huake Road, Huayuan Industrial District (Outside the ring), Binhai Hi-Tech, Industrial

Park, Tianjin, China

JOHN CRANE UK LIMITED

Ordinary

Buckingham House, 361-366 Buckingham Avenue, Slough, Berkshire, SL1 4LU, England

JOHN CRANE VENEZUELA CA

Ordinary

Carretera Vía a Perijá, Km 8 ½, Avenida 50, Local N° 185-72, Zona Industrial El Silencio, Maracaibo,

4001, Venezuela

KREISLER INDUSTRIAL CORP

Ordinary

180 Van Riper Avenue, Elmwood Park, NJ, NJ 07407, United States

KREISLER MANUFACTURING CORP

Ordinary

180 Van Riper Avenue, Elmwood Park, NJ, NJ 07407, United States

LAKES REGION TUBULAR PRODUCTS INC.

Ordinary

51 Growth Road, Laconia, NH, 03246, United States

LLC JOHN CRANE RUS

Interest

B. Savvinsky Per., D. 11, Moscow, 119435, Russian Federation

MODULAR METAL FABRICATORS, INC.

Ordinary

24600, Nandina Ave, Moreno Valley, CA, 92551, United States

PLENTY INDIA LIMITED

Ordinary

D-196 Okhla Industrial Area, Phase-1, New Delhi, 110020, India

PROJECT SUGAR LIMITED

Ordinary

Buckingham House, 361-366 Buckingham Avenue, Slough, Berkshire, SL1 4LU, England

ROYAL METAL PRODUCTS, LLC

Interest

100 Royal Way, Temple, Georgia 30179, United States

SEEBACH GMBH

Ordinary

Neckarweg 3, Vellmar, 34246, Germany

SEEBACH FILTER SOLUTIONS INDIA PVT. LTD.

Ordinary

No. 11, 1st Phase Peenya Industrial Area, Bangalore, 560058, India

SMITHS (SHANGHAI) MANAGEMENT CO., LTD.

Ordinary

3rd and 4th Floor, No. 1, Lane 65, Huanlong Road, Pudong New District, Shanghai, China

SMITHS AEROSPACE GLOUCESTER LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS BRASIL LTDA

Ordinary

Industrial District of the City of Rio Claro, State of Sao Paulo, Av. Brasil No. 4,700, CEP 13505-600, Brazil

SMITHS BUSINESS INFORMATION SERVICES LIMITED

Ordinary

Buckingham House, 361-366 Buckingham Avenue, Slough, Berkshire, SL1 4LU, England

SMITHS BUSINESS INFORMATION SERVICES, INC.

Ordinary

C T Corporation System, 357 East Center Street, Ste. 2J, Manchester, CT 06040-4471

SMITHS FINANCE LIMITED

Ordinary,

Redeemable

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS GROUP HOLDINGS NETHERLANDS BV

Ordinary

Buckingham House, 361-366 Buckingham Avenue, Slough, Berkshire, SL1 4LU, England

SMITHS GROUP INNOVATION LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

SMITHS GROUP INSURANCE LIMITED

Ordinary

Level 5, Mill Court, La Charroterie, St Peter Port, GY1 1EJ, Guernsey

SMITHS GROUP ITALIA SRL

Ordinary

Via Giotto 3, Muggio, 20835, Italy

SMITHS GROUP SERVICES CORPORATION

Ordinary

Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States

SMITHS INDIA SERVICES PRIVATE LIMITED

Ordinary

Tower B Cummins India Office, Campus Floor 4 SN21 Balewadi, Baner Gaon, Pune, 411045, India

SMITHS TUBULAR SYSTEMS-LACONIA, INC

Ordinary

CT Corporation System, 9 Capitol Street, Concord, NH 03301, United States

184

Smiths Group plc Annual Report FY2026

SUBSIDIARY UNDERTAKINGS

CONTINUED

Wholly owned subsidiaries (indirect ownership)

continued

Name

Security

Address

SMITHS WOLVERHAMPTON LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

STS TITEFLEX INDIA PVT LTD

Ordinary

No 38, KIADB Industrial Area, Bangalore, 561203, India

T I S A (FRANCE)

Ordinary

114, Rue Jules Ferry, B.P. 35, Deville-les-Rouen, 76250, France

THE DUC-PAC CORPORATION

Ordinary

1125 Page Boulevard, Springfield, MA, 01028, United States

TIGRUP NO. 14 LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

TITEFLEX COMMERCIAL, INC.

Ordinary

Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States

TITEFLEX CORPORATION

Ordinary

Corporation Trust Centre, 1209 Orange Street, Wilmington, DE, 19801, United States

TITEFLEX EUROPE SAS

Ordinary

22, Avenue Maurice Chevalier, 77330 Ozoir-la-Ferriere, Paris, France

TUTCO, LLC

Interest

116, Pine Street, 3rd Floor, Suite 320, Harrisburg, PA 17101, United States

TUTCO DE MEXICO SRL DE CV

Interest

Avenida Prologis, Sin Número, Edificio 6, Suite 610, Colonia Prologis Park, Reynosa, Tamaulipas, C.P.

88780, Mexico

US HOSE CORP

Ordinary, Preference

815 Forestwood Drive, Romeoville, IL, IL 60446, United States

WATTCO INC.

Ordinary

121 Hymus Blvd, Pointe-Claire, QC, H9R 1E6, Canada

Non wholly-owned subsidiaries, including joint ventures, associates and investments

Name

Security

Address

% of Group

ownership

JOHN CRANE JAPAN INC

Ordinary

2222, Kamitoyama Ritto City, Ritto-shi, Shiga-ken, Japan

70

JOHN CRANE PTY LTD

Ordinary

2, Jansen Road, Nuffield Industrial Sites, Springs Gauteng, South Africa, 1559

75

LLC JOHN CRANE ISKRA

Interest

28, Academica Vedeneeva Street, Perm, Permskiy Region, 614038, Russian Federation

50

PT JOHN CRANE INDONESIA

Ordinary

Cilandak Commercial Estate, Bldg 401A, Jl. KKO Cilandak, Jakarta 12560, Indonesia

99

XDG SERVICES LIMITED

Ordinary

Level 10, 255 Blackfriars Road, London, SE1 9AX, England

99

Overseas Branches

The Company does not operate through any branches. Some Group subsidiary companies have established branch operations outside the UK.

Overview

Strategic report

Governance

Financial statements

Smiths Group plc Annual Report FY2026

185

SUBSIDIARY UNDERTAKINGS

CONTINUED

Financial calendar

2026

2027 (provisional)

Announcement of FY2026 Results

22 September

Dividend ex-dividend date

15 October

Dividend record date

16 October

Last DRIP election date

2 November

Annual General Meeting

18 November

Q1 Trading Update

18 November

Dividend payment date

23 November

Announcement of FY2027 Interim Results

23 March

Interim dividend ex-dividend date

8 April

Interim dividend record date

9 April

Last DRIP election date

23 April

Interim dividend payment date

16 May

Q3 Trading Update

26 May

FY2027 financial year end

31 July

Announcement of FY2027 Results

21 September

Registered Office

Smiths Group plc

Level 10, 255 Blackfriars Road, London, SE1 9AX

+44 (0)20 7004 1600

Incorporated in England & Wales

Company No. 137013

www.smiths.com

Registrars

Our share register is maintained by Equiniti. If you have any questions

about your Smiths shares, please contact Equiniti.

Telephone:

T: + 44 (0)371 384 2943 (in the UK)

Lines open 8.30am to 5.30pm (UK time), Monday to Friday (excluding

public holidays in England and Wales).

For deaf and speech impaired customers, Equiniti welcomes calls

via Relay UK. Please see www.relayuk.bt.com for more information.

Write to:

Equiniti Limited, Highdown House, Yeoman Way, Worthing, West

Sussex, BN99 6DA.

Shareview:

Equiniti offers the Shareview portfolio service to investors.

Visit www.shareview.co.uk to register for an account. Through

Shareview you can access information about your investments,

including balance movements and indicative share prices, as well

as practical help about transferring your shares or updating your

personal details.

Dividends

Smiths has not issued dividend cheques since November 2019.

In order to have your dividends paid directly to your bank or building

society account please contact Equiniti for a copy of the Bank

Mandate Form, or register your nominated bank or building society

account by visiting Shareview. By registering your account all

future dividends will be paid securely by direct credit on the

dividend payment date. Alternatively, Smiths offers a Dividend

Reinvestment Plan. For more information, please visit our website

or contact Equiniti.

Annual General Meeting (AGM)

The 2026 Smiths Group plc AGM will be held as a virtual

meeting at 11.00am on Wednesday 18 November 2026 via the

Lumi electronic meeting platform. Details of how to submit

questions in advance, join, ask questions during the meeting

and vote are contained in the Notice of AGM, which is a

separate document sent to shareholders at least 20 working

days before the AGM and made available on the Company’s

website. A recording of the AGM will be made available on the

Company’s website shortly after the meeting.

Shareholders who are unable to join the AGM are

encouraged to appoint a proxy and submit voting instructions

in advance. Electronic and paper proxy appointments and

voting instructions must be received by the Company’s

Registrar no later than 11.00am on 16 November 2026 (or, in

the case of any adjournment of the AGM, no later than 48

hours before the time fixed for the adjourned meeting) in

order to be valid. Shareholders may submit proxy

appointments electronically through Shareview. CREST

members, CREST personal members and other CREST-

sponsored members should consult the CREST Manual or

their voting service provider for instructions on electronic

proxy appointment and voting.

If you are in any doubt as to what action you should take in

relation to the resolutions being proposed at the AGM, you

are recommended to consult your stockbroker, bank

manager, solicitor, accountant or other independent

professional adviser authorised under the Financial Services

and Markets Act 2000.

SHAREHOLDER

INFORMATION

This publication has been printed on Indigo Arena Extra White

Smooth which is FSC

®

certified. Printed sustainably in the

UK by Pureprint, a CarbonNeutral

®

company with FSC

®

chain of custody and an ISO 14001 certified environmental

management system recycling 100% of all dry waste.

This publication is produced by a CarbonNeutral

®

company

and Carbon Balanced with World Land Trust.

Balancing is delivered by World Land Trust, an international

conservation charity, who offset carbon emissions through the

purchase and preservation of high conservation value land.

Through protecting standing forests, under threat of

clearance, carbon is locked in that would otherwise be

released. These protected forests are then able to continue

absorbing carbon from the atmosphere, referred to as REDD

(Reduced Emissions from Deforestation and forest

Degradation). This is now recognised as one of the most

cost-effective and swiftest ways to arrest the rise in

atmospheric CO

2

and global warming effects. Additional to

the carbon benefits is the flora and fauna this land preserves,

including a number of species identified at risk of extinction

on the IUCN Red List of Threatened Species.

Front cover photography by Marcus Harvey Photography

Designed and produced by Conran Design Group

www.conrandesigngroup.com

Smiths Group plc

Level 10

255 Blackfriars Road

London SE1 9AX, UK

+44 (0)20 7004 1600

www.smiths.com

LSE: SMIN

ADR: SMGZY

view this report online at

www.smiths.com/investors

ANNUAL REPORT & ACCOUNTS FY2026