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10 August 2006

SMITHS Group will announce its preliminary results for the 2006 financial year on Wednesday, 27 September. At the start of its close period the company is providing the following trading update in respect of its headline performance for the year just ended.

As forecast at the interim stage, the company has sustained its pace of growth through the second half of the year, benefiting from a good operating performance across its activities and a background of generally favourable market conditions.

For the full year, sales are expected to be approximately 17% higher than in 2005, of which half will be from underlying growth. Headline operating profit is expected to have grown at a faster rate, resulting in an improvement in the net operating margin of more than half a per cent. The company is also expecting a strong cash-flow from operations this year. While interest expense will be higher than a year ago, it is anticipated that the increase will be largely offset by an improved pensions financing position. The companys tax rate on headline profit should be unchanged. While the US dollar weakened towards the end of the year, currency translation overall has been beneficial in 2006. Headline PBT and EPS are expected to be well ahead of 2005 and to be in line with analysts forecasts for 2006*.

At the divisional level, underlying sales and profits are expected to show a continuing improvement in all four businesses. Aerospace sales have grown strongly, although the margin in this division is expected to have remained steady due to an increase in R&D expense.

Looking ahead, with a robust market outlook for each of its sectors, Smiths expects good underlying sales growth in 2007. Higher volumes, productivity gains and lower R&D expense will provide the opportunity for further operating margin improvement. At the same time, interest rates have risen and the US dollar is currently significantly weaker than the average rate for 2006. Overall, the company expects to make further progress in the year just commenced.

Note to Editors

On a Smiths headline results basis, the consensus of analysts forecasts is approximately £485 - 490m for 2006 PBT and 63.4 - 64.1p for 2006 EPS.


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